AMGEN Inc (AMGN) — Q1 2015 Earnings Call Transcript

Okay, Brian, thank you. Good afternoon everybody. I would like to welcome you to our conference call to review our operating performance for the first quarter. After you’ve had a chance to assess our performance I think you’ll concur you’ll agree that we are off to a great start. To further discuss our performance today our Chairman and Chief Executive Officer, Bob Bradway, will lead the call. Bob will provide a brief overview of our strategic and operational progress followed by our CFO David Meline, who will review our Q1 results. Following David, our Head of Global Commercial Operations, Tony Hooper, who will discuss our product performance during the quarter, followed by our Head of R&D, Sean Harper, who will provide a brief update on our pipeline. We will give slides for presentation today, these slides have been posted on our website and a link was sent to you separately by email. Our comments today will be governed by our Safe Harbor statement, which in summary says, that through the course of our presentation and discussion today, we may make certain forward-looking statements and actual results may vary materially. So, with that, I would like to turn the call over to Bob. Bob?

Okay, thank you, Arvind. Good afternoon everyone, thank you for joining our call. As you can see from our results we’re off to a solid start so far in 2015. And our performance during the quarter is a good indication that we’re on track to deliver our long-term objectives as well. Financially, we delivered a strong quarter across the board. Our U.S. business delivered 15% growth and internationally we were up 10% at constant currency. Product performance was solid across the portfolio and I was especially pleased with the strong growth we delivered for Prolia, XGEVA, Kyprolis, Enbrel, and Vectibix. Heading into the balance of the year, we have good momentum in our base business and Tony will have more to say about that in a few minutes. Our earnings growth of 33% reflects the benefits of our transformation initiatives and our discipline in controlling expenses ahead of the launch investments that we’ll make later this year. As David will share based on the strong performance in the quarter we’re raising our 2015 earnings guidance. With the Corlanor approval last week we’re excited to bring the first new heart failure medicine to the market in the U.S. in almost a decade. Corlanor was approved to reduce the risk of hospitalization for worsening heart failure in patients with chronic heart failure, which is a significant economic burden on our society. Through Corlanor, we look forward to establishing our presence in the cardiovascular field as we prepare to launch Repatha later this year. In addition to Corlanor, we are launching BLINCYTO for patients with relapsed/refractory acute lymphoblastic leukemia and our Neulasta on-body injector which addresses a real clinical problem with an innovative solution that enables the administration of Neulasta the day after chemotherapy. R&D, as you know, is a core focus at Amgen and our pipeline continues to deliver results that position us well for future growth. We reported the third successful Phase 3 study for AMG 416, an intravenous calcimimetic for use in kidney disease. And a second successful Phase 3 study for our lead biosimilar product adalimumab. In oncology, Kyprolis delivered impressive results showing a doubling of progression-free survival versus bortezomib in relapsed multiple myeloma patients in our ENDEAVOR study and of course these data come on the back of the unprecedented progression-free survival data that were generated in our ASPIRE trial. Kyprolis is currently under accelerated review in both the U.S. and Europe for multiple myeloma patients who relapsed and we are excited with the opportunity to bring this important medicine to many more patients globally. Sean will speak more about progress in our pipeline in a few moments. In summary, there is a lot to be pleased about with our progress so far this year. Our strategy is working and it’s delivering results. We are executing effectively across the company, controlling the things that are ours to control. Our focus and priorities have never been more clear. Our launches are proceeding well and we are ready to launch Repatha later this year. We continue to grow key products including Enbrel, Prolia, XGEVA, Vectibix, Sensipar, and Nplate. We have strong momentum as we defend our base business against new competition and our transformation efforts are delivering efficiencies in cost savings across the company and we are being very disciplined about capturing them. Finally, we continue to advance our robust pipeline of important medicines setting the stage for long-term growth. Before I hand over to David, I would like to thank my Amgen colleagues many of whom are listening to this call for their unwavering commitment to delivering for patients and for shareholders. David?

Okay, thanks, Bob. Turning to the first quarter on Page 5 of the slide deck, revenues at $5 billion grew 11% year-over-year with 12% product sales growth driven by continued momentum across our product portfolio. Total revenue and product sales were impacted 2% unfavorably due to foreign exchange headwinds. Adjusted operating income at $2.4 billion grew 32% from prior year. Adjusted operating margin improved to 50% for the quarter, reflecting strong growth and continued progress from our transformation initiatives. On an adjusted basis, the cost of sales margin at 15.1% improved by 0.6 points driven by lower royalties and higher average net sales price offset partially by product mix. Research and development expenses at approximately $850 million, were down 14% versus the prior year. R&D spend was favorably impacted by the transformation and process improvements across the area. SG&A expenses were flat on a year-on-year basis, as increased commercial investments in new product launches were enabled by savings from transformation and process improvement efforts. Total operating expenses declined 3% year-on-year and 22% sequentially. This performance reflects the combination of the first quarter being typically the lowest expense level during the calendar year, plus a share of the $400 million of incremental savings expected during 2015 from our transformation initiatives. Going forward, we expect quarterly expenses to increase in line to modestly above historical trends, reflecting increasing launch and R&D investments through the balance of 2015. Other income and expenses improved 9% on a year-over-year basis at a $146 million in the quarter. The adjusted tax rate was 17% for the quarter, a 1.6 point increase versus Q1 of 2014. This increase was primarily due to the unfavorable tax impact of changes in the geographic mix of earnings, partially offset by a state audit settlement in the quarter. As a result, adjusted net income and adjusted earnings per share increased 33% on a year-over-year basis. Turning next to cash flow in the balance sheet on Page 6. For the first quarter, we generated $1.2 billion of free cash flow, an increase of $0.2 billion over the prior year. This increase was primarily driven by higher sales and profitability. Total debt outstanding ended Q1 at $30.3 billion and cash and investments totaled $27.1 billion. Additionally, our first quarter 2015 dividend increased to $0.79 per share, an increase of 30% versus the prior period. Finally, in the first quarter of 2015, we increased our share repurchase activity with over $450 million of share repurchases or approximately 3 million shares in the period. We intend to continue repurchases at a stepped-up level in 2015 consistent with the commitment to complete up to 2 billion of repurchases by the end of the year. Turning to the outlook for the business for the remainder of 2015 on Page 7, we remain on track with our plans to continue supporting growth of the business while transforming to a more agile and efficient operating model. With regard to our updated outlook for 2015 revenue, we are raising the bottom end of the range resulting in a revised guidance of $20.9 billion to $21.3 billion for 2015. This reflects solid revenue performance in the first quarter partially offset by the effects of foreign currency headwinds, which will exceed $200 million for 2015 at current rates versus our original planning framework, versus 2014 results we expect over a $300 million revenue impact or 2% in 2015 at current foreign exchange rates. Our revenue guidance also reflects progress on our product launch activities as well as our latest view of evolving competitive dynamics. We are also increasing our 2015 earnings per share outlook to $9.35 to $9.65 from the previous $9.05 to $9.40 forecast. The increased earnings outlook reflects continued conviction in our strategy and strong first quarter performance along with an incremental expected headwind of $0.05 per share from foreign exchange, versus 2014 results we expect to a $0.12 EPS impact in 2015 at current foreign exchange rates. We would also expect our quarterly tax rate to increase throughout the balance of the year to be more in line with our guidance range of 18% to 19%, which has a remainder excludes the benefit of the Federal R&D tax credit in 2015. Finally, we continue to expect capital expenditures of approximately $800 million this year. This concludes the financial update I will now turn the call over to Tony.

Thank you, David. And good afternoon folks, you’ll find the summary of our global sales performance for the first quarter on Slide number 9. I’m pleased to report that we’re off to a strong start in our first quarter of 2015. We select some execution across all aspects of our commercial strategy, launching products, growing on newer products and defending our mature in-line brands. Globally product sales grew 12% year-over-year. As Bob mentioned, our U.S. business delivered outstanding results of 15% year-over-year growth and our international business grew 10% year-over-year excluding the negative impact of foreign exchange. Let me first update you on our new product launches. In the U.S. our recent launches of BLINCYTO for acute lymphoblastic leukemia and the on-body injector for Neulasta are going very well with positive feedback from healthcare providers. BLINCYTO, as you know, was approved in two and a half months by the FDA underscoring the unmet medical need in ALL patients. We are seeing a broad acceptance of the product with orders from most major institutions and good reimbursement access. We launched the on-body injector for Neulasta during quarter one. Patients no longer have to return to the hospital 24 hours later after their chemo, the on-body injector simply infuses Neulasta then. We’re still in the early stages of our launch, we've seen good breadth prescribing with about 800 accounts ordering the product to date. Last Wednesday we received the approval for Corlanor to reduce the risk of hospitalization in patients with chronic heart failure. Corlanor is the first new medicine for chronic heart failure in the U.S. in almost a decade. Heart failure is a common condition that affects maybe six million people with an annual cost of over $30 billion in the U.S.; the majority of these costs are related to hospitalizations. And we at Amgen estimate there are as many as one million patients who could be candidates for Corlanor therapy. Since our approval last week, our manufacturing team has worked throughout the weekend to prepare labeling, packaging, and we made our first shipment to wholesalers yesterday. Product will be in pharmacies later this week and our sales force was trained and in the field. We’re excited about the opportunity and ready to bring this innovative new medicine to cardiologists and patients. Let me now turn to the first quarter performance beginning with Enbrel. On Slide 12, you see that Enbrel delivered strong growth of 13% year-over-year primarily driven by price. Segment growth remains strong in both rheumatology and dermatology growing 23% and 30% respectively. Competition continues to intensify, particularly in dermatology, where Enbrel has lost 5 points of value share over the last year, but still retains 27% share. And it will continue to be a logical choice of patients starting treatment with the biologic. On Slide 13, you will see that sequentially Enbrel sales declined 17%. Unit sales declined 7% reflecting normal quarter one season patterns and price growth of 9%. There was a 17% unfavorable impact in the inventory. You may recall from our conference call in January that wholesale inventories ended 2014 at a higher than normal level by about $40 million. We expect that level to return to normal in quarter one. However, in the first quarter the days on hand dropped to the low end of the range. Additionally, revised prescription data indicate there was modest end customer buying in the fourth quarter, which then burnt off in quarter one. To summarize, in quarter one, below normal wholesale inventory levels coupled with the end customer burn-off negatively impacted sales. We expect Enbrel to deliver significant growth in 2015 and as we said before we remain committed to Enbrel becoming a $5 billion brand. I’ll move now to Prolia. Prolia has delivered 39% growth year-over-year with 30% unit growth in the U.S. and 44% in the international market. Over the last year, Prolia market share grew three percentage points in the U.S. and about four percentage points in Europe. This performance is driven by our programs aimed at improving access, along with directed consumer marketing in the U.S. Prolia is now capturing one in three patients starting postmenopausal osteoporosis treatment in the United States. As you can see from the March prescription data, the expected Q2 pickup is underway. XGEVA continued its solid performance with 22% growth year-over-year. U.S. unit share increased four percentage points over last year and in Europe unit share increased about seven percentage points. Our brand strategy continues to focus on XGEVA’s superior clinical profile versus the competition. Over time, Vectibix has received expanded indications into earlier lines of therapy in metastatic colorectal cancer in both the U.S. and Europe. This delivered 18% year-over-year growth with exceptionally strong unit demand. We’ve also recently received additional pipeline indications in combination with chemotherapy in Europe. Let me now turn to Kyprolis, which delivered year-on-year growth of 59% and quarter-over-quarter growth of 19%. In the U.S., we received priority review for label expansion into second line based on these robust data, with a late July PDUFA date. We have submitted the application in Europe and it is currently under review. These data, together with our compelling ENDEAVOR data, should position Kyprolis as the best-in-class proteasome inhibitor. Sensipar grew 24% year-over-year driven by 14% unit growth, price, and inventory levels compared to quarter one in 2014. Nplate grew 12% year-over-year with strong unit growth in all regions across the world. Now turning to our mature brands starting with the progressing franchise. Neulasta delivered year-over-year growth of 4% in the first quarter driven mainly by price and inventory changes. As I mentioned earlier, we launched the on-body Neulasta injector during the quarter with very positive feedback from both providers and payers. NEUPOGEN declined 15% year-over-year mainly due to increased short-acting competition in the U.S. With strong execution, the value of the NEUPOGEN team resulted in relatively stable market share in the short-acting market around 80%. Granix was about 15% and Leukine about 5%. Things are competitive on a one-to-one basis, and we continue to reinforce NEUPOGEN’s long track record of clinical efficacy and safety, as well as its reliable supply for patients. With potential competition from biosimilars expected in the U.S. this year, we will leverage the success we’ve had in the U.S. versus brand competition, as well as our considerable experience with NEUPOGEN biosimilars in Europe. Next, EPOGENs saw an unusual 16% year-over-year growth in the quarter, on top of a price gain of 7%. EPOGENs year-over-year growth benefits from a favorable comparison to quarter one 2014, where end customers significantly reduced their inventory levels. Additionally, quarter one 2015 benefited from favorable accounting and discount adjustments as well as higher end customer inventories due to an SKU conversion. From an underlying business perspective, dosing and hemoglobin levels remain relatively stable and unit demand is relatively flat. Aranesp sales grew 4% year-over-year with a unit growth of 6%. A portion of this growth reflects the timing of early tender orders in the Middle East compared to 2014. In conclusion, I would like to personally thank our Amgen customer-facing teams across the world. This is a unique moment in our company’s history where we are launching, growing, and defending more brands than ever before. I know our team is embracing the Amgen value of competing intensely to win, and have a clear focus on delivering value for shareholders, Amgen, and most importantly, for patients. Let me now pass it to Sean.

Thanks, Tony. Good afternoon. It continues to be a very busy timeframe in R&D, and today I would like to start with our cardiovascular program, specifically the recent U.S. approval of Corlanor, or ivabradine, for chronic symptomatic systolic heart failure. Chronic heart failure is on the rise in the United States and represents a very large and growing healthcare expenditure burden primarily due to the cost of repeated hospitalizations for these very high-risk patients. In fact, reducing hospitalizations in these patients is a specific focus in many healthcare systems, including Medicare. A resting heart rate of 70 or more appears to be a maladaptive response in the setting of chronically reduced cardiac pump function. Yes, despite the availability of specific beta-blockers, many heart failure patients in the United States maintain an elevated heart rate at rest. For these patients, Corlanor’s unique mechanism of action could provide meaningful benefits in terms of reducing the risk of hospitalization for worsening heart failure. In the large outcome study performed by our colleagues, the risk was reduced by 26% compared to placebo on top of standard care including beta-blockers. Obviously, reduction in hospitalizations reflects patients doing better overall in terms of their heart failure management. We’re not only thrilled with the prospect of making Corlanor available to chronic heart failure patients in the U.S., but we also view this as an excellent way to reintroduce the company to the U.S. cardiology community as we prepare for the launch of our PCSK9 inhibitor, Repatha. Of course, Repatha continues to be a main focus for us in the U.S. and we’re very pleased to see the enthusiasm for this agent at the recent American College of Cardiology meetings. In response to the data we presented there and published in the New England Journal of Medicine, it’s quite remarkable to see so much depth of understanding and appreciation of the potential benefit-risk profile of this novel mechanism by cardiologists and lipid specialists. We were also pleased to file for Repatha in Japan with our partners at Astellas. The last thing I’d like to mention regarding our cardiovascular portfolio is omecamtiv mecarbil, or AMG 423, a novel mechanism agent we are advancing in systolic heart failure in collaboration with Cytokinetics. We look forward to seeing data in the second half of this year from our Phase 2 chronic oral study, which has now completed enrollment. Turning to oncology, we were pleased to receive priority review from the FDA on our Kyprolis supplemental NDA for relapsed multiple myeloma based on these promising data. We look forward to continued interactions with regulators to bring Kyprolis to patients in need. Also in the relapse setting, we were quite encouraged by the ENDEAVOR data demonstrating a doubling of progression-free survival in patients randomized to Kyprolis compared to Velcade. We look forward to providing details of these results at ASCO in the multiple myeloma oral section on Tuesday morning. We’re also initiating a Phase 3 study of a weekly dosing regimen for Kyprolis, which we feel will be quite important for patients and caregivers. I’d also note that during the first quarter, Vectibix was approved in the EU for first-line metastatic colorectal cancer in combination with FOLFIRI and was also granted full approval in the EU. Turning to T-VEC, we completed the Phase 1b portion of the T-VEC combination study we’re performing in metastatic melanoma in collaboration with Merck and their PD-1 antibody, KEYTRUDA. We expect to advance next into the Phase 3 portion of this exciting study. We’re in the final planning stages of a similar Phase 1b-3 study in head and neck cancer with Merck and KEYTRUDA as well. Clearly, the vast majority of the potential value of T-VEC lies in priming the immune system in combination with type 1 inhibitors and other mechanisms that modulate the immune system’s discrimination between cells and non-cells. We continue to explore such opportunities both within our own pipeline as well as in collaboration with others. In the meantime, despite the very rapidly evolving therapeutic landscape since the design of the T-VEC monotherapy study in melanoma, including the approval of multiple agents with proven overall survival benefits, we continue to believe that it is important to make T-VEC monotherapy available to the segments of patients in which meaningful rates of durable response were observed in Phase 3. We therefore look forward to our discussions on this topic at the FDA Advisory Committee meeting scheduled for April 29. Finally, we have decided to halt the self-administration study of the investigational product in the Phase 3 study of trebananib in first-line ovarian cancer, based on the recommendation by the Data Safety Monitoring Committee, which deemed the study unlikely to achieve its primary progression-free survival endpoint. In the inflammation space, our Phase 3 psoriasis data from Brodalumab, an IL-17 receptor antagonist, was very well received at the recent American Academy of Dermatology Meeting as we discussed in detail at our Investor Relations event. For those of you who were unable to participate, in addition to the very compelling efficacy data including superiority over Stelara, we did note that we’ve seen suicidal ideation and behavior in our Brodalumab program in patients known to be at risk for these events. However, we believe the evidence today does not suggest a causal relationship between IL-17 inhibition and suicidal ideation and behavior. Data have been provided to regulatory authorities and we will be discussing it with them on an ongoing basis. This topic will be an important and appropriate focus of regulators in their analysis of the risk-benefit profile during their review of the application as we plan to file for Brodalumab with our partner AstraZeneca globally mid-year. We also recently decided to stop the Phase 2 asthma study with Brodalumab based on futility at a planned interim analysis. In other areas, our Phase 3 head-to-head study of AMG 416 versus Sensipar in hemodialysis patients with secondary hyperparathyroidism was positive and we anticipate initiating global regulatory submissions in the second half of this year. Our biosimilar programs also continue to advance with positive Phase 3 data for our Humira biosimilar in rheumatoid arthritis. We view our migraine prophylaxis program with our CGRP receptor antagonist antibody AMG 334 as a top priority. We will strive to be both the first and best-in-class in this field. We expect to present data from our Phase 2b episodic migraine study at the International Headache Society Congress next month and to initiate Phase 3 later this year. Finally, I’d like to thank the R&D team at Amgen for their continued focus on innovation and execution of our key programs. In particular, recently it was very nice to see the level of acknowledgment paid to the remarkable breakthroughs in human genetics by deCODE in Iceland celebrated in both scientific and lay press. There is certainly much more to come in this very exciting era of biology. Bob?

Okay, thanks Sean. Before we move to Q&A, let me just repeat that we’re focused on executing against the strategy for long-term growth that we laid out during our business review meeting last October. We’re successfully executing on our new product launches. We’re now continuing to grow key products such as Enbrel, Prolia, XGEVA, Vectibix, Sensipar, and Nplate. Of course, we continue to advance our robust pipeline as you’ve just heard from Sean and our transformation efforts are delivering efficiencies in cost savings, which we’ll capture across the company. This quarter’s results prove to us that we’re making progress against our long-term objectives. And with that, we would like to take your questions. Bryan, do you want to remind our callers of the procedures for the Q&A?

I will try and be brief. There have been some questions about a partnership to support the launch of Repatha. And it seems as though it’s also fairly unclear, but is that something that you can now help us to rule out definitively given that you have a pretty short interval until the launch? Thanks.

Geoff, we’re excited about launching Repatha and we’re well along, as you say, in our plans for launching the molecule and we own the rights to this product globally and we look forward to commercializing it globally. Of course, we’re sharing, you know we had a partnership in Japan with Astellas, but otherwise the rights are ours.

Terrific. Well, I’ll take that as a no, thanks.

Thanks. You hit on the Neulasta on-body device briefly, but maybe if you could give some color as to the launch, how fast you think you can convert and whether there is anything else that we should be thinking about as to why that would be different than the NEUPOGEN competition like we saw there and how we can get comfortable with the current competition to Neulasta.

Michael, it’s Tony. So let me respond. Obviously, it’s pretty early in the launch period itself, but we’ve seen pretty good uptick across, as I said, the 800 institutions. The early debate was around reimbursement and access, and we’re locking that down as the product starts to move quite fast. We are exceeding our own internal expectations at this particular stage and we continue to see very good feedback from patients who really see this as a distinctive and definitive advantage. Nurses are also very keen to utilize the product and to help patients as they go home. And last but not least, more and more institutions are stepping in to buy the product. So we continue to see an ongoing conversion of the business to the on-body injector.

Question on Repatha. So, I know you probably don’t want to go too much into the patent infringement case against Sanofi and Regeneron, but – so just noticing that the proposed scheduling order is out there and has some of the key events – the Markman hearing for example and jury trial slated for after launch of both of these drugs. And I know you have talked about in the past about the possibility of a preliminary injunction. Is that still on the table or how should we think about that given the scheduling order that’s out there? Thanks.

Thanks for your question, Chris. We’re focused on having this matter reviewed on the merits. And as you pointed out, we’re fortunate that it looks like we’re going to be able to do that early in the new year. So, we’ll look forward to, again this is being reviewed in its entirety. And as you know, and as we’ve said before, we feel we have a very strong intellectual property patent estate on this product and we demonstrated in the past our determination to assert our IP rights and defend them and that’s what we look forward to doing for this product early next year.

Hi guys, thank you for taking my question. First, congrats on all of the progress in the last six months, 12 months on margins and on Kyprolis. So congrats on that. My question is actually on margins in the quarter. David, you talked about how you printed a 50% operating margin, which is dangerously close to the lower end of the 2018 margin guidance you gave and it sounds like you expect that margin to deteriorate throughout this year. I was wondering if you can talk through some of those dynamics as the year goes on. I think your guidance implies a full-year operating margin of maybe 44% or 45%. Could you talk about why your guidance implies deterioration throughout the year? And I recognize this is deterioration from a surprisingly great number this quarter? Thanks.

Yes, so first of all in Q1, as we said, we are really encouraged by the performance in the business, which was obviously a combination of solid top-line growth, as well as the fact that we had very good expense management in the quarter. If you frame that as to how that evolves through the year then what I would say is a couple of things. One is we’d indicated previously that we expect this year our transformation to deliver about $400 million of incremental savings, and certainly we saw a share of proportionate share of that already land here in Q1. And those savings will continue pretty steadily through the year. The second dynamic on cost then is around the cost trends, in particular if I look at SG&A and the sales and marketing area, as well as R&D, we do expect to see raising costs, which is a combination of the fact that we inevitably, normally for the business, the first quarter is the low point for expenses overall for the year. But I think importantly for us right now, we do have these launches that are coming up and we do expect to underwrite those launches significantly with these transformation savings and we do expect the trend of spending to increase through the year. So I think you basically framed it correctly as to how we are thinking about this evolving in the year.

And Mark, not to miss the opportunity to talk about the long-term, as I said and as David said in his remarks, we feel we are clearly making progress towards our long-term objectives including net margin objectives.

Brian, let’s take the next question.

Great, thanks for taking the question. I want to ask one of ivabradine. You guys have highlighted potentially a million patients do you think could potentially be candidates for ivabradine therapy that’s a pretty big market number when you look at how you price that at about $4,500 on an annual basis, and well below where forecast are. Can you maybe help us think about either why consensus is too low on ivabradine or why not all of that patient population you highlight is actually accessible? Thanks.

So we did the initial analysis based around looking at the number of patients with chronic heart failure and then specifically looking at the subset with heart rates of 70 and above. And that’s to help us hone down the size of a particular market. The pricing is determined based on the value proposition we think that we bring to market. Obviously, we come to market for the first time as a cardiology company, and we intend to try and reach as many of those million patients as possible.

Hi guys, thanks for taking my question. Just given the recent outcome of the BP CIA case and I guess the ruling - the first ruling was that you do not have to go through the patent dance and your confidence in the 2017 launch of biosimilar Humira. Can you help me understand like what gives you confidence that the timelines if you were to go through this patent dance won’t go longer, because many consultants say that this could go - the BP CIA discussion could go for many years beyond like two-year period or one-year period. So help me understand like your knowledge of that process, why it won’t take an extremely long time.

Well, Robyn, based on our understanding of legislation and the progress that we’re making in developing adalimumab, we still expect that we will be in a position to launch that in 2017. And of course, with respect to the Sandoz matter, we’re expecting that I will be heard in the appeal courts later in the year. Tony, do you want to add anything?

We’re basically debating a concept of 180 days notice. So that’s the debate at the moment. Once we get to a point in time that we would agree to the timeline with Sandoz they have the right to come to market at risk.

Thanks for taking the question. Maybe a follow-up to Mike’s question on the on-body injector for Neulasta. Tony, I have no idea of how to put the 800 accounts into context. Could you tell us sort of how many accounts you have in general for your last overall and is there a target conversion rate that you are hoping to get say over the next 12 months? What would you define as a successful conversion? Could you share with us?

So the 800 accounts are about 25% of our large customers. We clearly have a target that we are aiming for; I’m not going to disclose that at the moment, but we’re driving hard to get as much of our business to the on-body injector as possible.

Hi, thanks for taking my question. Obviously with the approval of ivabradine and the upcoming approval of Repatha, I’m just wondering if you can talk about your longer-term thoughts on your cardiovascular franchise because you will be putting your familiar sales reps behind these two products. Is there an appetite to continue to add in this area? Thanks.

Terence, it was a little bit hard to hear your question, but I think you were asking about Corlanor and Repatha. We are excited, as we’ve said, to launch in the cardiovascular field with Corlanor and we think again it’s an innovative medicine. It will require some work to educate cardiologists about the appropriate use of this medicine with heart failure patients, but we are excited about that and we are also excited about the innovative biology behind Repatha and the opportunity for that medicine to make a big difference for our patients with the risk of heart attack and stroke. So, our focus is on those two medicines right now. To the extent that we find other opportunities to advance innovative biology, we will look carefully at those. And as you know, we have one such medicine that’s in the late stage of development now, which is our omecamtiv mecarbil program, which Sean referred to earlier in his remarks. So those constitute three pretty exciting innovative opportunities for us right now and if we find opportunities to build on those we’ll look at them carefully.

Great, thanks very much for taking the questions and congrats on the very nice quarter here. Sean, I wanted to ask on the ENDEAVOR trial, the Kyprolis that you reported this quarter. Should we assume that the benefit you saw with Kyprolis over Velcade was observed in both the Velcade experienced and the Velcade naïve patients, because I think the trial allowed both? And can you also elaborate on the differences that you observed in cardiovascular safety between the agents and just putting it together based on the expert feedback? How do you think these results will impact the standard of care in myeloma here? Thanks.

A few questions in there. I’d say yes, we did see a pretty consistent treatment effect of Kyprolis independent of the baseline characteristics of these patients, whether they had experienced transplant before or whether they had been treated previously with Velcade. The cardiovascular safety data, I don’t have anything additional to say than the information we put in the press release until we would be presenting at ASCO. I do think that the standard of my view on it is that while there is always lots of exciting innovation going on in oncology these days, backbone therapies in this particular disease are going to include a proteasome inhibitor for a good long time and it’s becoming pretty clear that the best agent is Kyprolis.

Hi, this is Yaron. Regarding Repatha, what do you anticipate the label will look like? Do you expect standard tolerance to be a specific indication on the label or something broader?

Yes. Of course it’s very hard to predict what regulators will decide to do there. I think it is possible to write an indication which speaks to patients who are not adequately treated with respect to their LDL cholesterol response with stands or intolerant to stands, so if you look at a lot of the recent labeling indications that have been used by the agency, they have this sort of structure and that's kind of in my mind the base case of what you’d expect to hope to get in the various jurisdictions that we’re going to be negotiating the labels. But it’s really hard to predict exactly where the language will end up.

Thanks very much and congrats. Regarding the FDA panel for T-VEC next week, in recent cases, the FDA has approved drugs for a narrow indication when the package is less than perfect. I don’t know if that’s a positive case, but can you talk about whether there’s any population where the risk-benefit is especially compelling for T-VEC? Also, are you showing any checkpoint inhibitor combination data at the FDA panel?

Okay. So the first question, which implies that the package is less than perfect, I think it’s probably true, yes, that’s true almost everything we do. And I think that in this case it’s clear that the population we studied in the Phase 3 trial included a fairly broad range of patients with local-regional and metastatic melanoma disease. And I think if you’ve seen the data that we’ve presented in various scientific forums, the response and durable response rates and the subgroup analysis looking at survival for that matter show the biggest impact in the earlier stages of the disease. So it is possible that’s where the conversation would go at the advisory committee and with the FDA. But at this point, we do have a positive trial for the whole population that we studied and so that’s the logical place to start the conversation. And then with respect to the checkpoint inhibitor, all we would be doing at the advisory committee meeting would be to have a slide that will indicate of course the various studies that are going on and going with the product that include the ones I’ve referenced in my prepared remarks as well as certainly being capable of presenting the publicly available data with the evolocumab combination, the Phase 1b data that we presented previously at a scientific forum.

Hi. And good afternoon, thanks for taking my questions. First of all, I have a question on your biosimilar Humira programs here. Now that you’ve finished both Phase 3 trials already, what’s the timeline for a submission in your plans? And then second, do you plan to seek a broad label including oral indications that you did not try in Phase 3? And then quickly also, David, R&D costs are coming down much faster than SG&A this quarter compared to a year ago. Should we expect that to continue, and is that driven by research or development? Thank you.

Why don’t we break that into two parts? Sean will talk about the Humira question first?

Yes. So we do intend to submit Humira later this year, the biosimilar later this year. In fact, we would be seeking a broader label set of indications through the extrapolation mechanism that is consistent with the current guidances.

David?

Yes, so in terms of the cost savings, what I would first say is that if you look at the savings we expect this year as well as through the whole program, as we’ve said before that those are savings that are being accrued across all of the areas of cost, so it’s not concentrated in one versus the other. And secondly, if you look at the particular pattern of savings in the first quarter, what you can observe, as I mentioned, is that we are investing, freeing up flexibility to invest in our launch portfolio. So you can expect that a substantial share of what we save in SG&A will be reinvested towards the launches. And then I think the third thing I’d comment on R&D is that was a combination in the quarter of R&D tends to be rather lumping in terms of the spend. So you saw a combination of savings in that we are getting from our transformation in the quarter as well as some of the inevitable lumpiness that occurs from quarter to quarter in that area. So I think bottom line is that we expect, going forward through the year, to see rising costs, which you typically see in the pattern through the year. But see it a little more accentuated as a combination of rising costs with launch activities as well as in the case of R&D, we are still continuing to invest in clinical trials and we will see some increases there. And then as to the, if I may, one final comment R&D. Basically, as we have talked before, we’ve done work to look at all of the processes across all of our business activities and so we are seeing efficiencies in both of those areas broadly.

Thank you. A question on Romosozumab. In the structured trial comparing to Forteo is the change in the BMD if sufficient enough to differentiate it from Forteo or are you following the patient longer to see a difference in non-vertebral fracture risk reduction?

Hi guys, this is Carter on for Geoff. Tony, can you provide a NEUPOGEN share of the short-acting GCSF market for the quarter? And I guess more broadly, what are your expectations regarding the potential timing of a potential biosimilar Neulasta? I know some biosimilar companies have disclosed plans to file for approval later this year, potentially just on a PK-PD study without a Phase 3 study; your thoughts there would be appreciated. Thank you.

Okay. So just remind you, in fourth quarter 2014, NEUPOGEN’s market share was 80%. First quarter 2015, NEUPOGEN’s market share was 80%. As regard to Neulasta, they could enter the market towards the end of 2015 when our patent expires.

Hey Brian, why don't you go ahead and take one last question as we’re getting to the top of the hour.

Hi, good afternoon guys, thanks for squeezing me in. So I want to follow up on Matt’s question regarding Kyprolis. With the impressive results now I want to hand for ENDEAVOR as well as ASPIRE for that matter, how do you think about the implications for the frontline CLARION study? Perhaps more importantly, what does your market research suggest about the relative use of proteasome inhibitors in the frontline multiple myeloma study in relative to later stages of treatment? Thanks.

Why don’t I start in terms we can follow-up with? I think with respect to the CLARION study, which is of course the head-to-head study against lenalidomide in the first-line setting, we feel that study has been significantly de-risked by seeing the ASPIRE data and the ENDEAVOR data. To the extent which you’ve been read through results from ENDEAVOR to CLARION is something, you know, people sit around and debate, but certainly we feel good about the likelihood that we’ll see a favorable result from the trial. And Tony, do you want to respond to it?

Probably, we’ve done a fair amount of work. The objective in multiple myeloma is to drive progression-free survival for as long as possible before you have to go on to your second and third line. Therefore, we assume that we’ll be seeing usage in the first line once we get the indication.

All right. Cory, thanks for your question. As you pointed out, things are going very well for Kyprolis and we’re excited about the data that we have in hand as well as the data that we may generate. Well, thanks for joining our call, Arvind and his team will be around if there are questions that you didn’t get a chance to ask on the call. And we’ll look forward to connecting with you on the next quarterly call. Thanks.

Thank you everybody.