AMGEN Inc (AMGN) — Q1 2019 Earnings Call Transcript

Okay, thanks Ian. Good afternoon, everybody. Thanks for joining us today on our first quarter call. Special welcome to those who are new in their coverage of our company including Jay Olsen of Oppenheimer, Yaron Werber of Cowen, and Bill Kim of BMO. So we go into 2019 having put in place a strong track record of execution, and we are well prepared for the challenges and opportunities ahead. I'm joined today by our Chairman and CEO Bob Bradway, who will provide a strategic overview of our business and the environment we operate in. After Bob’s comments, our CFO David Meline will review our financial results for the first quarter. Our Head of Global Commercial Operations, Murdo Gordon, will then review our product performance, followed by our Head of R&D David Reese who will provide a pipeline update. We will use slides to guide our discussion today and you should have received a link separately. Just a reminder that we will use non-GAAP financial measures in today's presentation and some of the statements will be forward-looking statements. Our 10-K and subsequent filings identify factors that could cause our actual results to differ materially. So, with that, I would like to turn the call over to Bob.

Thank you, Arvind, and let me add to Arvind’s welcome to all of you joining the call today. We entered 2019 with a strong track record of execution and an improved ability to innovate, compete, and grow over the long term. We feel now well positioned to capitalize on the growth opportunities presented by our newer products in our pipeline, even as we effectively defend our mature products against emerging and expected new competition. As you know, drug prices are being challenged around the world, and we, therefore, have said for some time that we expect volume-driven growth to be important to our long-term success. And in Q1, we once again demonstrated our ability to grow unit volumes, especially for our newer products like Prolia, Repatha, and Aimovig, as well as for our six hematology/oncology products that are in early phases of their life cycle. I believe our performance outside of the US, where we have faced biosimilar competition for over a decade is instructive. There, our business generated 15% unit volume growth in the first quarter as growth of our newer products more than offset the erosion of our mature brands and biosimilar competition. We remain confident in the lifecycle management strategies we have in place to defend our mature brands, and we believe there is considerable upside potential with our newer products that will drive attractive long-term growth. As a leader in bone health with Prolia, we know that there's a need for an additional innovative therapy for women who are at high risk for fracture from postmenopausal osteoporosis. In Q1, we added Evenity to our portfolio of first-in-class innovative medicines with approvals in Japan and earlier this month in the US. Postmenopausal osteoporosis remains a highly underdiagnosed and undertreated disease with potentially devastating consequences from fractures, many of which are predictable and preventable. And we're excited to be at the forefront of offering innovative products to the millions of women worldwide who may benefit from them. I want to take a moment to highlight our biosimilars business, which we think represents a compelling opportunity to leverage our world-class biologics capabilities. This business is now annualizing at more than $200 million this year, with Kanjinti and Amgevita off to strong starts in Europe and select other international markets. We expect other launches this year and we see biosimilars making important contributions to our revenue profile moving forward, especially as pressure on our drug pricing creates increased demand for lower-cost treatment options. Murdo will discuss our full product portfolio in some detail shortly. Looking to the future, we are rapidly advancing a robust pipeline of innovative medicines, many of which have the potential to be first-in-class or best-in-class therapies. In oncology alone, we're capitalizing on our industry-leading BiTE portfolio and targeted therapies across a number of important disease areas including multiple myeloma, AML, as well as various solid tumors. As you know, oncology programs can move very rapidly from proof of concept to registration, and we're excited about what we're seeing. You'll hear more from Dave Reese on our pipeline in a moment. Our strong balance sheet and cash flow have enabled us to provide significant returns to our shareholders through buybacks and dividends, even as we invest in long-term, volume-driven growth opportunities around the world. Our financial strength also gives us the ability to consider a wide range of business development opportunities, consistent with our areas of strategic focus, while remaining disciplined to ensure we earn a solid return for shareholders. Let me just say a few words also about healthcare reform and drug pricing. Simply stated, we're in favor of policies that provide more patients with greater access to better healthcare, and we continue to work with the administration and Congress to advance policies that harness the competitive power of the marketplace, encourage innovation, and improve access to new therapies for patients. For example, we're supportive of the administration's proposal to move from back-end rebates to upfront discounts in order to lower out-of-pocket costs for patients. Even in the face of net price declines, as we experienced last year, patients are not seeing the benefits of rebates. In fact, out-of-pocket costs for patients have been rising in recent years, which underscores the need for the administration to move forward with its final rule. I want to just close with one final message, which is that we will build on our recent transformation successes and have the resources and determination to take advantage of the many opportunities in front of us to meet our competitive challenges and to deliver long-term growth. Now, let me invite David to share his remarks on the first quarter.

Okay, thanks Bob. The first quarter marked another period of solid performance for the company as we delivered mid-single digit volume growth globally, while we increased investment in the business and delivered year-over-year non-GAAP EPS growth in the first quarter. Turning to the financial results, worldwide revenues were $5.6 billion in the first quarter, with worldwide product sales of $5.3 billion, declining 1% year-over-year as strong unit demand for our newer products was offset by declines in our mature products, including small molecule generic competition against Sensipar. Other revenues at $271 million increased $60 million driven by royalty income growth. As we continue to make incremental investments to rapidly advance our innovative pipeline and maximize the value of our marketed products, our non-GAAP operating expenses increased 11% year-over-year. This also contributed to our non-GAAP operating income result at 9% lower than the previous year. On a non-GAAP basis, cost of sales as a percent of product sales increased by 2 points to 14.7%, driven by higher manufacturing costs and product mix, partially offset by lower royalty expense. As mentioned last quarter, for the full year, we continue to expect year-over-year cost of sales expense to be flat to up depending on sales volume. First quarter research and development expenses of $859 million were 16% higher due to increased investments in support of our multiple differentiated early-stage oncology programs. Research and development expense as a percent of product sales was 16.3% for the quarter. For the full year, we currently expect R&D spend on an absolute basis to rise in single-digit percentage terms in 2019. SG&A expenses increased 5% on a year-over-year basis, primarily driven by support for our newly launched products, including Aimovig, Evenity, and our biosimilar Amgevita and Kanjinti. For the full year, we continued to expect SG&A spend to decline as launch expenses normalize, and we continue with our resource allocation discipline. We remain on track to meet our initial 2019 operating expense guidance of inline versus 2018 on an absolute basis. Our operating expense guidance anticipates several important factors, including that we continue to benefit from our productivity program; that we make appropriate investments in support of our inline portfolio; that we advance our innovative and biosimilar programs; and that we continue to increase our global presence where we are experiencing rapid volume growth. Other income and expenses were a net $158 million expense in Q1. This is favorable by $24 million on a year-over-year basis. The non-GAAP tax rate was 14.6% for the quarter, an increase of 0.9 percentage points, primarily due to prior year tax benefit associated with inter-company sales under US corporate tax reform. Non-GAAP net income declined 10% and non-GAAP earnings per share increased 3% year-over-year for the first quarter to $3.56 per share. Turning next to cash flow on the balance sheet. Free cash flow was $1.7 billion. This was lower than the first quarter last year driven by lower net income and an increase in sales deductions paid to customers following higher third and fourth quarter 2018 sales. I note that Q2 will be negatively impacted as we make one-time tax payments of approximately $1 billion, including our second annual repatriation tax payment. We continue to provide significant cash returns to shareholders, consistent with our commitments, as we deployed $3 billion in Q1 to repurchase 15.9 million shares at an average price of $191 per share. Given our attractive share price, we plan to repurchase an incremental $1.5 billion to $2 billion of our shares in Q2. Additionally, our first quarter dividend increased to $1.4 per share, an increase of 10% over last year. Cash and investments totaled $26.3 billion, a decrease of approximately $5.9 billion from the first quarter of last year. Our debt balance stands at $33 billion as of March 31, carrying a weighted average interest rate of 4% and an average maturity of 10.8 years. Turning to the outlook for the business for 2019, we remain on track with our plans to continue to invest to advance our pipeline, including our early oncology programs, build out our global presence, and drive long-term volume growth. In light of our Q1 performance, we are raising our 2019 guidance. Our revised revenue guidance is $22.0 billion to $22.9 billion versus previous guidance of $21.8 billion to $22.9 billion. This continues to reflect the range of outcomes related to Sensipar generic competition as well as the evolving competitive dynamics associated with the rest of our inline portfolio. With regard to our non-GAAP earnings per share guidance, we're revising the outlook to $13.25 to $14.30 per share versus previous guidance of $13.10 to $14.30 per share. Further, we're maintaining our non-GAAP tax rate guidance of 14% to 15% and we continue to expect capital expenditures of approximately $700 million this year. This concludes the financial update. I will now turn the call over to Murdo.

Thanks, David and good afternoon everyone. You'll find product sales information starting on slides 10 and 11. We're off to a solid start in 2019 with continued volume-driven growth across our portfolio of newer products, while we successfully execute lifecycle management strategies in our more mature brands. Moving to first quarter results, let me start with Repatha on slide 12. Given the dynamic nature of the PCSK9 class and our confidence in Repatha, I want to provide some detail on its performance and growth prospects. Q1 sales grew by 15% year-over-year, as we hold leading share of the PCSK9 class. Worldwide unit growth was 81% year-over-year with 90% unit growth in the US. The growth is attributable to increasing prescribing depth by cardiologists, increasing prescribing breadth by primary care physicians, and increasing patient fulfillment following the introduction of lower list price Repatha. In Medicare, lower list price Repatha is now available to more than 60% of seniors. The next step is to make the lower list price version available to a majority of Part D patients at a lower fixed copay versus the current co-insurance structure. While this is underway, it's expected to improve early next year as Part D plans update for 2020. Currently, only 6% of Medicare patients are at a low fixed copay level of above $50. For patients covered by commercial insurance, approval rates have improved by 11 points year-over-year, as we continue to secure improved payer utilization management criteria through contracting. We will continue to work with health plans, PBMs, and the US administration to get lower list price Repatha to patients more rapidly. And we remain committed to discontinue our original list price Repatha as we see sufficient coverage in the market, which could be between now and the beginning of 2020. With regard to pricing, the blended net price for Repatha in the US declined in Q1 due to annual contracts that took effect in January. We're optimistic that we will see a positive impact on volume growth and reported net sales over the longer term. Outside of the US, we continue to work with country authorities to optimize access and are pleased with our first-ever launch in China. Overall, our priority remains to help the large underserved population of high risk cardiovascular patients that can benefit from Repatha. Onto Prolia on slide 13. Prolia delivered another strong quarter with sales increasing 20% year-over-year, driven by 17% volume growth. As a reminder, given its six-month dosing interval, Prolia exhibits a seasonal sales pattern with Q1 and Q3 representing lower sales than Q2 and Q4. Overall market penetration of the addressable patient population is only in the mid-20% range, indicating significant potential for improved diagnosis and treatment. With its unique profile and through increasing investment, we expect Prolia will remain a very consistent growth driver. I'd like to take the opportunity to comment on our recent approval and launches of Evenity in the US and Japan in conjunction with our partners, UCB and Astellas. The World Health Organization calls osteoporosis a global epidemic, as there are fewer diagnosed and treated patients in the US than a decade ago. In the US alone, osteoporosis is responsible for 2 million fractures and given the aging population, annual direct costs of osteoporosis are expected to reach $25 billion by the year 2025. Evenity has convenient once-monthly physician-administered dosing for 12 months and strengthens Amgen’s leading position in bone health with two highly innovative molecules that are complementary. We are confident in our ability to continue to penetrate this market. Our US sales force is trained and is already promoting the product. Meanwhile, our launch in Japan through our joint venture with Astellas is off to a strong start. Now on to Aimovig on slide 14. To begin, the unmet need for migraine is substantial. There are approximately 4 million individuals in the US alone who take preventative medications for migraines. However, compliance is low as 75% discontinue therapy after only a year. Approximately 200,000 new patients in the US have now tried Aimovig since it launched less than a year ago, and it remains a significant opportunity for growth as CGRP penetration of the overall market is low. We expect this number to expand considerably given the 26% sequential TRX market growth for CGRP inhibitors in Q1. Prescriber breadth is consistently increasing as over 22,000 physicians have now prescribed Aimovig since launch. We’re particularly encouraged that primary care adoption is steadily rising, with nearly 8,000 prescribers to date. We also have indicators that our recently launched direct-to-consumer program is increasing patient awareness for Aimovig. Now, let me take a few minutes to help you understand Aimovig’s performance in Q1. First, Amgen is the market leader with 40% share of new-to-brand prescriptions and 60% share of the total prescriptions exiting Q1. Aimovig benefits from strong market access conditions with over 75% approval rates for new patients in both commercial and Medicare Part D plans. Regarding net selling prices, we experienced a decline that is the net result of two dynamics. Recall that during the early launch phase of the product, a majority of paid prescriptions were reimbursed at near list price. Currently, the proportion of our business under commercial contract and receiving discounts is near 70%. Meanwhile, the proportion of paid versus free prescriptions increased to 60% at the end of the first quarter. Looking forward, we expect to see strong CGRP market growth while competing effectively for share. Offsetting this, Aimovig patient persistence will continue to be dynamic, given competing free product offerings in the market. We expect net prices to stabilize in 2019 as a majority of coverage decisions have been made. Additionally, the proportion of free prescriptions should continue to decline over the remainder of 2019. We're confident in the potential for Aimovig to positively impact patient lives and the recent launch of the single 140 milligram auto-injector will further enhance the patient experience. Moving to our Hematology and Oncology business, the portfolio of XGEVA, Kyprolis, Nplate, Vectibix, BLINCYTO, and IMLYGIC collectively totaled $1.2 billion in the quarter, growing 8% year-over-year. Looking at additional details for some of the larger brands within this portfolio, let's start with XGEVA on slide 16. In Q1, XGEVA grew 6% year-over-year primarily from volume as we gradually see share increasing to just above 60% in the US. We recently received preferred status over zoledronic acid in castration-resistant prostate cancer in the recently revised NCCN guidelines, reinforcing XGEVA superiority in this indication. Moving to Kyprolis, which grew 10% year-on-year driven primarily by growth in key markets including the US, which had 12% growth. Our team continues to emphasize Kyprolis overall survival benefit, and we are pleased to see increased adoption of the once-weekly dose approaching close to 20% share of Kyprolis use in the US. On to Enbrel, sales increased 4% year-over-year, of which 2% was non-recurring, which included a positive 10 point impact from changes in accounting estimates offset partially by 8 points from unfavorable inventory changes. During Q1, rheumatology market growth accelerated by 12% versus the 6% on average over the last eight quarters. Share trends continued and we recognized a limited benefit from net selling price in the quarter, which we expect to persist for the full year. We continue to invest in Enbrel, including the Enbrel mini with Auto touch, a multi-use device, which continues to receive positive feedback from physicians and patients. Next to our filgrastim brands starting on slide 19. In Q1, Neulasta sales declined 12% year-over-year, which included a $98 million purchase from BARDA. We exited Q1 with approximately 90% share of the long-acting segment with Onpro holding share at close to 60% of the segment. Insurance coverage of Neulasta also remains strong in the US with close to 90% of commercial lives and 99% of Medicare lives covered. Currently, we're seeing increased competition in medium-sized clinics and small non-340b hospitals and are prepared for additional US entrants in 2019, should they receive approval. Outside of the US, Q1 year-over-year sales declined 12%. We now face three long-acting biosimilar competitors in a number of countries in Europe and expect additional entrants during 2019, which will likely accelerate the pace of the decline. More broadly, we remain confident that our experienced established record of quality, dependable supply, and innovative solutions such as Onpro will serve us well as we compete account by account. Turning to slide 20, Neupogen sales were $73 million in Q1 ’19, sequentially US Q1 results benefited from $7 million of accounting adjustments and Neupogen exited the first quarter with roughly 30% share of the short-acting segment. Since the introduction of Neupogen biosimilars in the US, costs to the healthcare system for short-acting filgrastim have come down meaningfully. Switching to nephrology starting on slide 21, Q1 Epogen sales declined 10% due to lower net selling price. The first quarter benefited from approximately $20 million of large end customer purchases. Given our contractual pricing commitments with DaVita, net price will continue to decline for Epogen in 2019. Aranesp declined 9% year-over-year in Q1, driven by lower volume due to increased competition. We expect Aranesp sales to continue to decline at a faster rate in 2019 versus 2018 with both long-acting and short-acting competition in the US. Parsabiv continues to experience solid growth, independent and mid-sized dialysis providers utilize Parsabiv for a majority of their calcium-emetic patients, while FMC and DaVita are gradually increasing adoption. Turning to Sensipar, as a result of some at-risk small molecule generic launches you can see on slide 24, that our US Q1 sales of $135 million are significantly lower than recent quarters. Given the intrusion of these at-risk launches that have now occurred, we expect US sales in Q2 to be lower than Q1. Going forward, performance will be dependent on the outcome of legal proceedings and the rate of consumption of generic inventory across periods. I'd like to close by highlighting the strong performance of our biosimilars where uptake of our European launches for KANJINTI and AMGEVITA is progressing as we anticipated. We're planning for multiple new launches from this portfolio over the next few years and look forward to bringing the value of these assets to patients and the healthcare system. In summary, I'm pleased with the solid execution and dedication of our team, as our portfolio evolves in 2019. We're successfully launching new products, driving volume growth and demonstrating the value of our mature brands. We're also now establishing a strong presence in the biosimilars market with customers who appreciate the high quality of Amgen services and product supply. I'm confident that we are prepared to maximize the opportunities to bring Amgen’s products to a greater number of patients. Now, let me turn it over to Dave Reese.

Thanks, Murdo and good afternoon, everyone. We're off to a rapid and exciting start to 2019 in R&D with progress across our pipeline. I'll begin with our oncology portfolio. We continue to advance our BiTE platform with approximately a dozen molecules now in or close to the clinic. In hematologic malignancies, at ASCO, we will provide an update on the dose escalation trial of our first-generation BCMA BiTE molecule, AMG 420. We are now enrolling patients in a dose expansion study. We also expect some of the first clinical data from our new generation BiTE platform by the end of the year with AMG701 and the extended half-life BCMA BiTE molecule. Our enthusiasm is high for our BCMA BiTE molecules as well as our CD38 bispecific and MCL1 programs as we pursue our commitment to develop therapies that can make a meaningful impact on the treatment of multiple myeloma. Other presentations at ASCO will include the first in human dose escalation study of AMG 212, a BiTE molecule directed against prostate-specific membrane antigen, or PSMA, which is highly and specifically expressed in the majority of human prostate tumors. This clinical study was conducted by Bayer through a license they had with Micromet prior to our acquisition. We believe the data from this trial provide proof of concept for the target and bispecific T-cell engager approach in solid tumors, and we have introduced a new half-life extended BiTE molecule, AMG 160, into clinical testing for prostate cancer. AMG 160 is now progressing briskly through dose escalation. As with all of the targets for which we have both first-generation and half-life extended BiTE molecules in clinical development, we will preferentially advance the half-life extended molecule if we observe comparable safety and efficacy between the two formats. One final note on our BiTE programs. Recently, we have seen intriguing early clinical evidence of potentially enhanced activity of a BiTE molecule, in this case, BLINCYTO, when given in combination with a PD1 inhibitor. We anticipate sharing a larger data set within a year or so. There's substantial evidence that T-cell activation leads to upregulation of the PD1 access, providing a rationale for this combination. Based on these biologic and clinical insights, we are incorporating early checkpoint inhibitor combinations into many of our BiTE programs and I'll have more to say on this as studies initiate and we accrue data. I'd like to turn now to a program of great interest, our KRAS G12C program, AMG 510. By way of background, RAS mutations occur in about 25% of all human cancers and the specific KRAS G12C mutation occurs in about 14% of lung adenocarcinomas, the most common form of non-small cell lung cancer. It also occurs in about 4% of colon cancers, a couple of percent of pancreatic tumors, and at a low frequency in various other cancers. RAS has been a target of active exploration since it was identified as one of the first oncogenes, but it remained undruggable due to a lack of traditional small molecule binding pockets on the protein. The G12C mutation produces a very shallow group, which allowed us through elegant medicinal chemistry to design an irreversible small molecule inhibitor that locks KRAS into its inactive state. I've spoken in the past on how we are improving productivity and accelerating the timelines of drug development here at Amgen, and AMG 510 is an excellent example. When we knew that we could generate an inhibitor to a key oncogene that had been undruggable for over 30 years, we accelerated preclinical development and advanced the program from discovery to first in human trials in well under a year. Our presentations at AACR demonstrated that we have a highly specific molecule with good drug-like characteristics that can be dosed orally once a day. We also showed in preclinical models that AMG 510 may act synergistically with other agents, particularly where the preclinical data AMG 510 inflamed tumors, in part by upregulating class 1 MHC expression and enhancing sensitivity to checkpoint inhibition. We look forward to the opportunity to share the initial data from our first-in-human dose escalation study in patients with solid tumors containing KRAS G12C mutations at the upcoming ASCO meeting in Chicago where we will also be hosting an investor event. There have been a lot of questions on the extent of the data that will be available. And what I would say here is that you should expect basic exposure data and the cumulative efficacy and safety data we've got to date. While we have been in the clinic for only about eight months, we've completed dose escalation and are expanding enrollment at the target dose. Moving forward, we will also be exploring AMG 510 in combination with checkpoint inhibitors based on the preclinical work I've described and various targeted therapies. We are currently moving ahead to include a combination with a PD1 inhibitor in our expansion study. Based on the early clinical data and feedback from our investigators, we're very optimistic about the potential for AMG 510 to address unmet medical needs, and look forward to seeing many of you at ASCO. Finally, in oncology, we recently began recruiting patients in a combination study of AMG 176, our intravenous MCL1 inhibitor in non-Hodgkin’s lymphoma and AML after seeing strong preclinical evidence of synergy. We're also rapidly advancing our oral MCL1 inhibitor, AMG 397 through dose escalation in patients with hematologic malignancies. We expect initial clinical data from these programs later this year, along with several other programs. In our accompanying presentation, you can find an overview of our hematology oncology clinical portfolio. Moving to our other therapeutic areas, as a leader in bone health, we are pleased to receive approval of EVENITY as Murdo noted in the US for the treatment of osteoporosis and postmenopausal women at high risk for fracture based on disease characteristics or a history of fracture. Postmenopausal osteoporosis, a silent epidemic that affects women in societies around the world, leads to approximately 2 million fragility fractures per year in the United States alone. Despite this, it remains an underdiagnosed and undertreated disease with only 20% of these women receiving any type of osteoporosis treatment post fracture. EVENITY is the first and only anabolic therapy with a unique dual effect that both increases bone formation and, to a lesser extent, reduces bone resorption. For patients who need to rapidly increase bone mineral density in 12 months, EVENITY can reduce the risk of a first or subsequent fracture, and in particular, clinical fractures with symptomatic breaks that often lead to disability. In cardiovascular disease, we expect the complete enrollment of our Omecamtiv mecarbil phase 3 cardiovascular outcomes study by mid-year and recently passed an interim futility analysis with no recommended changes to the study. AMG 890 or LP(a) siRNA also continues to progress and we anticipate sharing data later this year or early next year. We recently received a pediatric indication for Corlanor for the treatment of stable symptomatic heart failure due to dilated cardiomyopathy in patients six months and older who are in sinus rhythm with an elevated heart rate. And finally, in migraine, as Murdo noted, we received approval for our single 140 milligram Aimovig auto-injector, our pre-filled syringe in the US. Following inflammation, we began enrolling a phase 2 atopic dermatitis study with Tezepelumab. I'm also pleased to report that our phase 3 study for ABP 959 or biosimilar is enrolling patients. I’ll close by thanking our staff for advancing our exciting pipeline and continuing to deliver for our patients. Bob?

Okay, thank you. Let's open the line up now for questions. And perhaps, I can ask our operator to remind you what the procedures are for submitting your questions. Thanks.

Dave, I was hoping to ask a two-part question on KRAS. So I guess the first thing is, it seems like you've progressed through the dose escalation period fairly rapidly. Is that because you hit the MTD faster than you were expecting or are there other factors such as faster enrollment at play? And then how should we view the fact that you're pushing forward here with combinations with PD1? As part of that, the monotherapy efficacy that you've seen is below what you were expecting, or do you think you can drive efficacy substantially higher with those combinations? Thanks.

Thanks, Matt, for the questions around the KRAS program. Let me take them in order. In terms of the dose escalation, I think we will present the clinical data at ASCO. We had a planned dose escalation in the phase 1 trial, we were able to move through that very quickly based on tolerability. We had quite brisk enrollment based on pre-identification of patients at most of our centers, and we're pleased to have been able to move along in eight months, in a population that is a fraction of lung cancers and other tumors. In terms of the combination, as I've indicated before, I think based on the clinical setting, these molecules may find a home as either monotherapy or in combination. It’s early days, and we're moving quickly to investigate both of these approaches as we move forward and the combinations will be not only with PD-L1 inhibitors based on some of the preclinical data that I described in terms of the KRAS inhibitor, inflaming tumors, and upregulating MHC 1 expression, but also data we've generated on other components of the pathway. So I think all of those will be pieces of what we explore going forward. This program is moving as quickly as almost any I've ever seen here at Amgen.

Maybe Bob would love your perspective just on the proposed Part B demonstration project. In particular, do you anticipate that the IPI proposal could remain here, do you expect there could be any changes? Thanks a lot.

Well, it's a proposed rule as your question implies, Terence, and that enabled quite a bit of commentary and the administration has received something like 4,000 comments from different groups, including quite a wide range of physician groups and patient groups that were concerned about the proposal. It won't surprise you to know that we're concerned about it, and we've expressed that concern as well. We're not interested in seeing patient access to innovative new medicines and physician choice impaired by a potential rule like this. So we and others in the innovative industry have expressed that to the administration. And I think if you compare the situation in the United States where patients have access to innovative medicines very rapidly, in fact, if you just look at cancer, 95% of the new cancer medicines are available to Medicare patients here in the US, and that compares to about 65% of the same medicines being available in France. And by the way, in France, they're available some 21 months later. So in a cancer patient, that can mean the difference between life and death. So we're not in favor of a rule like this that might have the effect of diminishing access to innovation and impairing investments in innovation over the long term. Having said that, we have been working with the administration around other proposals that we think can help address the concerns of the administration, and we'd like to continue to do that. So we think there are some things that the administration could pursue that would enable the government to get access to the market prices and still enable physicians and patients to use the medicines that they think are appropriate for these diseases.

My first question has to do with the Neulasta trend. So year-over-year, sales came down by 12%, units went up by 1%, inventory went down 3, so by my math, the net price is probably coming down by roughly 10%. Can you comment on the pricing trend for the rest of the year for Neulasta? And then can you quickly provide an update on the Enbrel patent ruling against Sandoz.

So Ying, I'll take the first one, and then I'll ask Bob perhaps to talk about the other question regarding Sandoz and Enbrel. I think overall, we're pleased with how we're performing in the market despite two biosimilar competitors against Neulasta. In particular, we see good durability of our Onpro business, which is holding at around 60% share of the long-acting filgrastim franchise. We also continue to compete at an account-by-account level, and we defend as you point out significant volumes. What will drive further price erosion and potentially share erosion is the number of new competitive entrants, and we're following that very closely going forward.

On the court case, nothing new to report. As you know, we're waiting for the judge to rule and nothing new to report there.

Thank you very much. First question for David, regarding KRAS, could you help us understand how the treatment response to this specific intervention should compare to other mutations in lung cancer that we are familiar with? For instance, with EGFR, is it expected to be as standard as those mutations? Additionally, Murdo, could you provide more details on Aimovig? It seems that you have come out of some pressure regarding the share of new prescriptions. Is this a one-time occurrence in the first quarter reflected in the prescription data, or has there been a decline due to the contract, and is this the new normal? Thanks.

Sure, I'll go ahead and start with the question regarding KRAS biology. I think there's probably no specific answer for that, Jeff. In some tumors, this mutation will be a trunk mutation, a driver mutation, and we may well expect monotherapy activity in other tumors based on the other suite of molecular alterations that are present, you may need combinations or another approach. I think these are all things we will sort out where we'll be doing extensive molecular profiling on the tumors as we move forward to try to sort out the best predictors of response and resistance.

Yeah, and Jeff, considering the huge unmet need in migraine, we continue to feel good about the opportunity to grow new prescription base and to continue to compete effectively for share. As you know, we're still the market leader with 60% TRx share, around a 40% NBRx share. We have nice coverage across commercial and Medicare Part D payers. And we continue to drive good increases in the percent of patients that are paying for their Aimovig through commercial insurance benefits. So what we are seeing in our trends, in our total prescriptions is some effect of the bolus of patients that we secured when we first launched into the market and working then through the free drug to paid transition. We're also trying to understand what the persistence is in the CGRP category. We saw that it was between 20% and 30% in clinical trials, and we'll be looking to see how that shapes up in the real world as we move forward.

Quick R&D question, you'd mentioned Tezepelumab phase 2 moving forward in atopic derm, hadn't Tezepelumab missed a primary important in the prior phase 2a and AD and what sort of the difference in how you're thinking about this, how high has this evolved?

Yeah. I think we've gained a greater understanding of the approach to the disease, the variants and background medications. This is a disease that also has a waxing and waning of natural history. And so we have, with our partners, designed a subsequent phase 2 study that we think will rigorously evaluate the utility of Tezepelumab in AD.

I want to change the pace for a second and ask about the progress you've been making with Omecamtiv, specifically if there are any additional planned interim analyses for futility or stopping for efficacy. Also, I'd like to hear your initial thoughts on how you think this may be positioned in heart failure, maybe alongside something else.

Sure. This is Dave. I'll take that question. So, typically in these trials, there are interim analyses for efficacy. They are event driven, and we will communicate at the appropriate time as we might expect those data. I think one of the things that excites us about Omecamtiv is that its mechanism of action is novel, we think it's orthogonal to many of the existing therapies and should be able to be added to existing background therapies. To me, that's one of the potential great attractions of the drug for advanced heart failure.

Great. Thank you. So David, I've also a follow-up on KRAS, can you give us a little bit of a sense, was this a typical three by three dose escalation? Or are you doing into patient escalation? And would you break out the results by tumor type as well? And then I have a quick question on Sensipar.

Yeah, what I'll say is all those questions will be answered at ASCO. And, I don't want to get out in front of our investigators and steal their thunder, but will provide great detail in the phase 1 presentation. What was your second question? Wanted to ask a second question about Sensipar?

Can you provide some insight on the launchers for Sensipar? Are they unclear and still affected by the litigation scheduled for June?

Yeah, so what I'd say, this is Meline. So first point is, if you look at the guidance that we offered this afternoon, what we've given you is, while it's a bit narrower, it's still quite broad. And the reason for that is the uncertainty around, will we have additional launches this year or not. And of course, that is driven by the fact that we do have litigation that's still going on and we expect that to conclude here sometime in the coming months. So, hence the breadth of the guidance.

I wanted to ask about the Humira biosimilar market in Europe. We know that biosimilars in the European landscape is fairly mature. But with so many competitors out there, how are you seeing how the market for Humira will shape out and how do you position your biosimilar with so many competitors?

Yeah. Thank you, Do, for the question. This is Murdo. What we're seeing in Europe in general in the biosimilars market is more rapid penetration of the biosimilars of the innovator compound, so higher biosimilar penetration in general across a number of different categories. Our shares are more or less in line with what we had anticipated and price is a little lower. So we're seeing higher volume due to that penetration, offsetting somewhat lower prices and the prices you have to be a little bit careful. Most of the interest and news that we read about on pricing, particularly in the case of the Humira biosimilar were related to tender prices in some smaller European markets. And those were pretty significant winner-takes-all price reductions. What you're seeing in the broader marketplace at the national formulary level and at regional formularies are better prices holding up quite well and we foresee the biosimilar business to be a significant revenue driver for some time to come.

I'm curious about the VESALIUS-CV outcomes trial for Repatha. Can you comment on the key differences between this outcomes trial and the Fourier trial and how that study may impact on long-term commercial potential for Repatha? And then separately, anything we should be looking out for at AAN next week in terms of data for Aimovig. Thank you.

Well, I'll get half of the Repatha question and then Murdo will take the other one and I can address that Aimovig at AAN. So in terms of VESALIUS, these are patients with known, essentially known coronary artery disease, but who have not had an event, so they are very high risk. It's a population that numbers in the millions beyond what we were the target population studied in the Fourier trial. We think it should add to the substantial body of evidence that we have with Repatha in another high-risk population. Murdo, you may want to comment on the commercial component.

Yeah, we’re continuing to work hard to penetrate that high-risk cardiovascular patient population and compete in that category. We are seeing the data are more similar than different to what we've already had in the public domain. And we're really pleased with the 80%, 81% volume evolution and we continue to believe that more and more physicians are understanding the value of treating these higher-risk cardiovascular patients.

And then in terms of Aimovig data at the American Academy of Neurology meeting, which is starting in four or five days, we do have what I think are some very interesting data, long-term safety and efficacy data in both chronic and episodic migraine. The abstracts for those who are interested are up now. In chronic migraine, for example, we were able to show that roughly two-thirds of patients were able to convert to episodic migraine, meaning fewer than 15 migraine days per month. And on average, depending on the population and the dose, the number of migraine headache days per month was reduced by 8 to 12 days per month. That's a very substantial clinical impact for these patients, as you can imagine. So those data are coming out within the next week or so.

Those data also support the launch of the new single 140 milligram dose. So they give in that patients who got to that higher dose tend to do even better on conversion.

Right. And there are, in those patients, complete responders, which is remarkable in this disease.

Hey, thanks for the question. Good afternoon. I guess I wanted to ask a question related to two ongoing litigation issues, somewhat with the same company. One is, if for some reason the IP does not go in your favor for some reason on Enbrel, what are the implications? And what are the scenarios that we should know or for shareholders to know? And then maybe you can just comment on the separate litigation related to Aimovig, the thing that was a bit surprising to people. So maybe just comment on what the implications are there. Thanks so much.

Yeah, sure, Mike. I can understand that. On the first one, we feel pretty strongly about the IP case that was presented. And so obviously, if judgment were to go against us, we would immediately appeal. But on the Aimovig partnership, look, the first thing to underscore is that the teams in the field are committed to doing what's right for patients here and it's unfortunate that we have a dispute with our partner about this matter. But that's why we had dispute resolution options specified in a contract like this. So we feel that our partner is enabling a competitor product. And so we want to pursue that matter in courts, and that's where we are. But as I said, that will probably play out over a period of time. And in the meanwhile, both teams are committed to continuing to pursue this therapy for those patients who benefit from it.

I just wanted to talk a little bit about the biosimilars because I know you've had put out kind of a longer-term guidance around the $3 billion number, but I just wanted now that we have some biosimilars in the market, how you guys are thinking about the prospects, do you think it’s a more attractive business, less attractive about the same, just want you to kind of frame some of the puts and takes that we can think about potential longer-term value of that business?

Obviously, it's still very early days in the US based on our European experience and what we continue to believe the market outlook is, in the US, wouldn't change the long-range comments we've made. Historically, I think that they still hold up. And we continue to pursue a number of really interesting and solid molecules and we continue to prepare for launches in the US in the not too distant future.

I wanted to ask on Aimovig and wondered if you could provide some color on this constipation issue that some docs and your competitors talk about with the drug. I guess I'm wondering how frequently this leads to discontinuations and what you might be doing to alleviate this, assuming it is even, in fact, an issue.

Yeah, thanks for the question. We do hear about this issue. And obviously we're always making sure that we provide necessary patient support and physician support around the safety net part of our product. But we also think on this one, there's quite a large amount of rhetoric that's been created around this issue, given how the product performed in clinical trials, the stated incidence of constipation, our label, and it'll even be reported in the long-term follow-up data at AAN. And so I think it's been well characterized in good, well-designed and continuous clinical trials. We're also pleased that many physicians, particularly the prescribers in the large scale headache centers, are telling us that it's a relatively low incidence, and that they have very little trouble having patients started on Aimovig and persisting. I think, some of the other things we're seeing in persistence and I mentioned it in response to an earlier questioner just, given that we were the entire market for many months without competition, we are seeing some persistence effects in our continuing patient population that are different than what you might have concluded from looking at the clinical trials. And that's a function of both people who are moving from one free trial offer to another. And it's a function of people who are perhaps not pursuing commercial insurance. And obviously, there's a small component of that that is switching away to other agents. So there's still an evolving understanding of how persistent patients are to your question on discontinuation of Aimovig and it will take many months to understand that you need at least a 12-month look-back period. That puts us in the 18 to 24-month timeframe before we'll be able to actually ascertain durability.

And Cory, from a clinical perspective, I would reiterate what Murdo said, what we hear from physicians experts is that they see it at a low incidence? It's clinically quite manageable. They don't really view it as any sort of barrier at all.

Just had a pipeline question for Dave. Broadly on the earlier pipeline, you're still in dose escalation for BCMA, for PSMA, for KRAS, et cetera. But presumably you’ve had some evidence of efficacy and I know it's data dependent, but is there a path to moving rapidly into pivotal studies, even if it's the registration phase 2, I just wasn't sure if this was even an option or there had been discussions with regulators on this. Thanks.

Yeah, of course, that'll vary program by program. But what I would say in general is that our goal in these programs will be to move as quickly as we can through dose escalation and then move into expansion and potentially pivotal phases of the program. I think given the target diseases and the potential regulatory paths, that's a realistic expectation. And that's how we've planned many of the clinical development programs.

I wanted to go back to KRAS again for a quick second and basically ask, based on everything you saw in the preclinical data, would you have expected to hit MTD by this third or fourth dose? And also you mentioned seeing cumulative efficacy at ASCO is what do you intend to show? Should we be expecting a dose response? And then separately on Enbrel, was curious what the net price trend was in the first quarter year-over-year adjusting for the accounting treatment? Thank you.

Okay. I think there were several questions, Umer.

In relation to KRAS, again the clinical data will present, so I won't comment on the specifics of dose response. I will say that this is an irreversible inhibitor. And our anticipation is that achieving adequate exposure for a period of time, probably a few hours over the course of a dosing interval a day is adequate to poison the target and inhibit signaling, and so our dose escalation was planned with that goal in mind and will present complete details in about a month at ASCO.

And Umer, on your question regarding Enbrel, we did have a strong quarter on Enbrel. It was primarily driven by a strong market across rheumatology, and we did see some net price benefit based on that price increase as well as improved contracts in the New Year.

Could you provide the relative sales figures for Kanjinti and Amgevita? I'm trying to track those products individually. Additionally, Murdo, regarding Aimovig, you mentioned expectations for net price stabilization of this product. I'm curious about this comment because it seems the payers have not yet chosen their preferred agents. I'm wondering if this could lead to further price reductions once they make their selections, especially with oral options expected to launch in about a year. Could you help clarify this?

Thanks, Ronny. We're not breaking the biosimilar sales by brand yet. Still a volatile market, but we are happy with both trends on both products going forward. We're also, as you look at Aimovig, my comment, if you recall, has two components to it. One is the net price reduction based on additional contracts that could occur throughout the course of the year, plus a rising percentage of prescriptions that are paid and the two offsetting one another, leading to a stable price, at least for this year. And I think that that would be my clarification to your question.

Let’s take one last question and afterwards Bob will make some closing comments.

I guess one for me, a multipart one on Repatha, on the new CVOT trial. I guess maybe if you could just give us some color on what the genesis of the designer of that trial was, given it seems to mimic medicines companies almost like line for line. And should we be thinking of that as a validation of the value proposition in the marketplace as we think about long-term Repatha sales?

I'll be happy to address that question. Yeah. I mean, that's, we design that study from a technical perspective, just the way we design any study, based on expected magnitude of effect, target population, all of the typical statistical calculations that go into clinical perspectives that go into study design, we weren't using anyone else’s trials, a template for that study, and I wouldn't call it validation of anything but the internally consistent results from that trial alone.

Bob, would you like to make some closing comments?

Okay. Thank you. Well, in closing, we're off to a good start in 2019. And I hope you share our team's enthusiasm for our long-term prospects. We have a number of medicines that are in our inline portfolio that can and we expect will benefit significantly more patients as we grow longer term. We have an emerging portfolio of branded biosimilars, which we talked about, and we think will be a new source of growth for us. We're advancing a record number of potential new medicines in our pipeline targeted at some of the most prevalent costly and serious diseases facing society today. Our financial strength I think, is evident again this quarter and our durable cash flows will allow us to continue to invest in the business, but also provide meaningful returns for our shareholders and deliver transformational innovation for patients. Most importantly, I want to just end by thanking our staff who are fully engaged and behind our mission and thank them for the work they did to get us off to a solid start in 2019. We look forward to talking to all of you at the ASCO investor meeting and then at the second quarter call in July. Thank you.

Right. Thanks, everybody. If you have any follow-on questions, if we didn't get to your question or if you have comments you would like to discuss, feel free to reach out to me or other members of my team. Thanks again.