Amgen Inc.

My name is Ian, and I'll be your conference facilitator today for Amgen's third quarter 2019 financial results conference call. All lines have been placed on mute to prevent any background noise. There will be a question and answer session at the conclusion of the last speaker's prepared remarks. In order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question during the Q&A session. To ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, please press the pound key. I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Okay. Thank you, Ian. Good afternoon, everybody. Thanks for joining us today. So we have a lot of ground to cover, so I'll keep my comments very brief. I'd like to begin by acknowledging those who are new in their coverage of our company, with the most recent being Jeff Meacham, who is now at Bank of America Merrill Lynch. Also want to correct an oversight on my part from a Q2 call, as I inadvertently forgot to acknowledge Evan Segerman of Credit Suisse, who initiated back in the second quarter. A warm welcome to both Evan and Jeff. Okay, so on to our Q3 results. Continued execution on our strategy, launch progress, and pipeline advancement are some key themes that come to mind as I think about our third quarter results. To discuss these in some detail, I'm joined today by Bob Bradway, our Chairman and CEO, After Bob's comments, our CFO, David Milleen, will review our financial results for the third quarter and provide update guidance for 2019. Our head of commercial operations, Murda Gordon, will then review our product performance, followed by Dave Reese, our head of R&D, who will provide a pipeline update. We'll use slides to guide our discussion today, and a link to those slides was sent separately. Just a reminder that we'll use non-GAAP financial measures in today's presentation, and some of the statements will be forward-looking statements. Are 10-K of subsequent SEC filings identified factors that could cause our actual results to differ materially? So with that, I would like to turn the call over to Bob.

Bob? Okay. Thank you, Arvind, and good afternoon, everyone. I'll begin the call today with some comments about our third quarter performance while also touching on the industry environment and how we're responding to it strategically. Several years ago, we realized the need to transform certain aspects of our business to stay ahead of the curve and position ourselves for a sustained long-term growth. Anticipating pressure on drug pricing, for example, we emphasized the importance of innovative medicines that can grow over time through volume and access increases. And that's what we're seeing again in the third quarter from brands like Prolia, Repatha, and Amavig, generating double-digit volume increases. It's not just these brands that are exhibiting volume growth. A number of our specialty products, including Parsaviv, Coprolis, and Hensido, also register double-digit volume increases. And in aggregate for our portfolio, this is the seventh quarter in a row that we've reported volume growth globally. We think that bodes well for our long-term outlook. As you're aware, drug prices have indeed come under pressure. In the U.S., for the first time in more than 40 years, as the Council of Economic Advisers recently reported, the CPI Prescription Drug Index actually declined over the previous 12 months by 0.7%. This broad price decrease in 2019 is consistent with our own experience. Against this backdrop, a flow of innovative medicines that address major unmet medical needs will be more important than ever. As Dave Reese will discuss in a moment, we're excited about our pipeline, and we're investing to rapidly advance it. Thanks to a set of productivity capabilities embedded throughout our organization, we've been able to increase our R&D spending this year, up 8% in the third quarter, while keeping overall expenses flat. We've been especially focused on building differentiated capabilities in discovery research. For example, we think recent collaborations with the UK Biobank and Intermountain Healthcare will enable us to extend our industry-leading human genetics capabilities. Over time, we expect a better understanding of human genetics will enable us to dramatically improve both R&D cycle times and success rates. And with our new evolution deal completed earlier this year, we're positioning Amgen for what we anticipate will be a new era of multi-specific drug development, focusing initially on targeted protein degradation. We made a strategic decision several years ago to build a branded biosimilars business. leveraging our world-class biologics development and manufacturing capabilities. Our first three biosimilars, Mgivita, Kanjinti, and Mvasi, generated about $173 million in the third quarter and are annualizing at approximately $700 million. We expect our growing portfolio of reliable, high-quality biosimilars to be an important growth opportunity for us in the years ahead. The demand for quality healthcare is growing globally, and this has led us to steadily expand our geographic presence. In the third quarter, our product sales outside the U.S. grew by 15%, with volume growth of 23%. We expect sales outside the U.S. to account for an increasing percentage of our total product revenues over time. We're excited, for example, to have recently launched Repatha in China, our first product entry, into the world's second largest pharmaceutical market. We expect this to become an important market for us through time, just as we can now see Japan emerging as an important new opportunity for us. In 2020, we look forward to assuming full ownership of our very successful collaboration with Astellas in Japan, the world's third largest pharma market. We think our portfolio of products is well suited to the needs of an aging population in China and Japan in particular. Finally, let me reiterate that we're excited about our planned acquisition of Otezla as announced in August. Amgen has been a leader in the treatment of inflammatory diseases for decades. With Enbrel, our recent launch of Amgivita in Europe, and pipeline opportunities like Tezapelumab, Otezla will significantly strengthen our inflammation portfolio. It will also enhance our geographic presence as we're acquiring global rights to the product, which is approved in more than 50 markets worldwide. We expect the Otesla acquisition to close before the end of the fourth quarter, giving us an asset that will add to our long-term growth. Of course, we look forward to welcoming the Otesla team to Amgen. Our capital allocation priorities remain intact. We will continue to invest in the growth of our business internally. and through business development aligned with our stated strategy while also providing attractive returns to our shareholders through our growing dividend and continued share repurchases. Before I turn the call over to David, let me just note that I'll say a few words about him and his planned retirement at the end of our call. David, over to you.