Amgen Inc.

My name is Ian and I will be your conference facilitator today for Amgen's first 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 and then the number one on your telephone keypad. To withdraw your question, please press the pound key. I would now like to introduce Arvin Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

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 Olson of Oppenheimer, Jeroen Werber of Cowan, 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 Malin 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, Dave Rees, who will provide a pipeline update. We will use slides to guide our discussion today and you should have received the 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 and 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, Rapatha and Amavig, 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 U.S., 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 from biosimilar competition. We remain confident in the life cycle 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 is a need for an additional innovative therapy for women who are at high risk for fracture from post-menopausal osteoporosis. In Q1, we added a vanity to our portfolio of -in-class innovative medicines with approvals in Japan and earlier this month in the U.S. Post-menopausal osteoporosis remains a highly underdiagnosed and undertreated disease with potentially devastating consequences from fractures, many of which are predictable and preventable. We are 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 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 -in-class or -in-class therapies. In oncology alone, we are 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 are excited about what we are seeing. You will hear more from Dave Reiss on our pipeline in a moment. Our strong balance sheet and cash flows enable 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 health care reform and drug pricing. Simply stated, we are in favor of policies that provide more patients with greater access to better health care. 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 are supportive of the administration's proposal to move from back-end rebates to up-front discounts in order to lower -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, -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 from the first quarter.

Okay. Thanks, Bob. The first quarter marked another period of solid performance for the company as we delivered -single-digit volume growth globally while we increased investment in the business and delivered -over-year non-GAAP EPS growth in the first quarter. Turning to the financial results on page 6 of the slide deck, worldwide revenues were 5.6 billion in the first quarter, with worldwide product sales of 5.3 billion declining 1 percent -over-year, as strong unit demand for our newer products was offset by declines in our mature products, including small molecule generic competition against Sensepar. 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 percent -over-year. This also contributed to our non-GAAP operating income result at 9 percent lower than previous year. On a non-GAAP basis, cost of sales as a percent of product sales increased by 2 points to 14.7 percent, 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 -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 percent 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 percent 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 percent on a -over-year basis, primarily driven by support for our newly launched products including Amovig, Aveneti, and our biosimilar Amjavita and Canginti. For the full year, we continue 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, one, that we continue to benefit from our productivity program, two, that we make appropriate investments in support of our inline portfolio, three, that we advance our innovative and biosimilar programs, and four, 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 -over-year basis. The non-GAAP tax rate was 14.6 percent for the quarter, an increase of .9 percentage points primarily due to prior year tax benefit associated with intercompany sales under U.S. corporate tax reform. Non-GAAP net income declined 10 percent and non-GAAP earnings per share increased 3 percent -over-year for the first quarter to $3.56 per share. Turning next to cash flow on the balance sheet on page 7, free cash flow was 1.7 billion. This was lower than 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 a billion dollars, 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 to 2 billion of our shares in Q2. Additionally, our first quarter dividend increased to $1.45 per share, an increase of 10 percent 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 percent and an average maturity of 10.8 years. Turning to the outlook for the business for 2019 on page 8, 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 to 22.5 percent. This is the same as the previous guidance of 21.8 to 22.9 billion versus previous guidance of 21.8 to 22.9 billion. This continues to reflect a range of outcomes related to sense of power 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 are revising the outlook to 13.25 to 14.30 per share versus previous guidance of 13.10 to 14.30 per share. Further, we are maintaining our non-GAAP tax rate guidance of 14 to 15 percent, 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 life cycle 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 percent year over year as we hold leading share of the PCSK9 class. Worldwide unit growth was 81 percent year over year with 90 percent unit growth in the U.S. 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 percent 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 percent of Medicare patients are at a low fixed copay level of about $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'll continue to work with health plans, PBMs, and the U.S. administration to get lower list price Repatha to patients more rapidly, and we remain committed to discontinue our original list price Repatha once 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 U.S. 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 U.S., 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. Now onto Prolia on slide 13. Prolia delivered another strong quarter with sales increasing 20 percent year over year driven by 17 percent 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 percent range, indicating significant potential for improved diagnosis and treatment. With this 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 a vanity in the U.S. and Japan in conjunction with our partners, UCB and Astellis. The World Health Organization calls osteoporosis a global epidemic as there are fewer diagnosed and treated patients in the U.S. than a decade ago. In the U.S. alone, osteoporosis is responsible for two million fractures and given the aging population, annual direct costs of osteoporosis are expected to reach $25 billion by the year 2025. Venity has convenient once-monthly physician-administered over 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 U.S. sales force is trained and is already promoting the product. Meanwhile, our launch in Japan through our joint venture with Astellis is off to a strong start. Now, on to AMOVIG on slide 14. To begin, the unmet need for migraine is substantial. There are approximately four million individuals in the U.S. alone who take preventative medications for migraines. However, compliance is low at 75% discontinued therapy after only a year. Approximately 200,000 new patients in the U.S. have now tried AMOVIG since it launched less than a year ago and there 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 AMOVIG since launch. We are 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 AMOVIG. Now, let me take a few minutes to help you understand AMOVIG'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. AMOVIG 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, AMOVIG 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 AMOVIG 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 Xceva, Kiprolis, Endplate, Vectabix, Blincyto and Imligi 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 Xceva on slide 16. In Q1, Xceva 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 zolotronic acid and castration resistant prostate cancer in the recently revised NCCN guidelines, reinforcing Xceva's superiority in this indication. Moving to Kiprolis, 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 Kiprolis' overall survival benefit and we are pleased to see increased adoption of the once weekly dose approaching close to 20% of share of Kiprolis use in the US. On to Embro, 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 Embro, including the Embro Mini with AutoTouch, a multi-use device which continues to receive positive feedback from physicians and patients. Next to our Phil Graston brand starting on slide 19, in Q1, Nelasta 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 Nelasta also remains strong in the US, with close to 90% of commercial lives and 99% of Medicare lives covered. Currently, we are 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. I've cited 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 decline. More broadly, we remain confident that our experience, established record of quality, dependable supply, and innovative solutions such as OnPro will serve as well as we compete account by account. Turning to slide 20, Nupogen sales were 73 million dollars in Q1 2019. Sequentially, US Q1 results benefited from $7 million of accounting adjustments, and Nupogen exited the first quarter with roughly 30% share of the short acting segment. Since the introduction of Nupogen biosimilars in the US, costs to the healthcare system for short acting, Philgrass has come down meaningfully. Switching to nephrology, starting on slide 21, Q1 epigen 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 the VITA, net price will continue to decline for epigen in 2019. Our NASP declined 9% year over year in Q1 driven by lower volume due to increased competition. We expect our NASP sales to continue to decline at a faster rate in 2019 versus 2018 with both long acting and short acting competition in the US. Parcibiv continues to experience solid growth. Independent and mid-sized dialysis providers utilize Parcibiv for a majority of their calcium emetic patients, while FMC and the VITA are 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 Kenjinti and Amjavita 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's 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 Reiss.

Thanks Murdo, and good afternoon everyone. We are 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 haematologic malignancies, at ASCO we will provide an update on the dose escalation trial of our first generation BCMA BITE molecule, AMG420. 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, an extended half-life BCMA BITE molecule. Our enthusiasm is high for our BCMA BITE molecules as well as our TB38 bispecific and MCL1 programs as we pursue our commitment to develop therapies that can make a meaningful impact in the treatment of multiple myeloma. Other presentations at ASCO will include the first in human dose escalation study of AMG212, 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, AMG160, into clinical testing for prostate cancer. AMG160 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 is substantial evidence that T cell activation leads to up regulation of the PD1 axis, 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 will have more to say on this as studies initiate and we accrue data. I would like to turn now to a program of great interest, our KRASG12C program, AMG510. By way of background, KRAS mutations occur in about 25% of all human cancers and the specific KRASG12C 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 low frequency in various other cancers. KRAS has been a target of active exploration since it was identified as one of the first oncogenes, but it remained undruggable due to the lack of traditional small molecule binding pockets on the protein. The G12C mutation produces a very shallow groove, which allowed us through elegant medicinal chemistry to design an irreversible small molecule inhibitor that locks KRAS into its inactive state. I have spoken in the past on how we are improving productivity and accelerating the timelines of drug development here at Amgen and AMG510 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 AMG510 may act synergistically with other agents. A particular interest for the preclinical data that AMG510 inflamed tumors in part by up regulating class 1 MHC expression and enhanced 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 have got to date. While we have been in the clinic for only about eight months, we have completed dose escalation and are expanding enrollment at the target dose. Moving forward, we will also be exploring AMG510 in combination with checkpoint inhibitors based on the preclinical work I have described and various targeted therapies and 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 are very optimistic on the potential for AMG510 to address unmet medical need and look forward to seeing many of you at ASCO. Finally in oncology, we recently began recruiting patients in a combination study of Venetoclax plus AMG176, our intravenous MCL1 inhibitor in non-Hodgkin's lymphoma and AML after seeing strong preclinical evidence of synergy. We are also rapidly advancing our oral MCL1 inhibitor AMG397 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 were pleased to receive approval of AVENIDI, as Murdo noted, in the US for the treatment of osteoporosis in postmenopausal women at high risk for fracture based on either disease characteristics or a history of fracture. Postmenopausal osteoporosis, a silent epidemic that affects women and 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 percent of these women receiving any type of osteoporosis treatment post fracture. AVENIDI 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, AVENIDI 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 Omecantib Macarble Phase III Cardiovascular Outcomes Study by midyear and recently passed an interim fertility analysis with no recommended changes to the study. AMG 890, our LP little 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 Corlenor for the treatment of stable symptomatic heart failure due to dilated cardiomyopathy in patients aged six months and older or in a minor rhythm with an elevated heart rate. Finally, in migraine, as Murdo noted, we received approval for our single 140 milligram Imavig autoinjector or pre-filled syringe in the US. While in inflammation, we began enrolling a Phase II atopic dermatitis study with pesipelumab. I'm also pleased to report that our Phase III study for ABP 959, our biosimilar celeris, 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. Ladies and gentlemen, as a reminder, if you'd like to ask an audio question, you may do so by pressing star followed by the number one on your telephone keypad. Again, that's star one. Our first question is from line of Matthew Harrison from Morgan Stanley.

Great. Good afternoon. Thanks for taking the question. Dave, I was hoping to ask two part on KRAS. So I guess the first thing is it seems like you've progressed through the dose escalation period fairly rapidly. You know, 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 know, you're pushing forward here with combinations with PD-1? You know, is part of that 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. You know, let me take them in order. In terms of the dose escalation, you know, I think we'll present the clinical data at ASCO. You know, we had a planned escalation, dose escalation in the phase one trial. We were able to move through that very quickly, you know, based on tolerability. We had, you know, 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, you know, in a population that is a fraction of lung cancers and other tumors. In terms of the combination, you know, as I've indicated before, you know, I think based on the clinical setting, you know, these molecules may find a home as either monotherapy or in combinations. 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 PDL-1 inhibitors based on some of the pre-clinical data, you know, 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 AmGym.

And our next question is from the line of Terrence Flynn from Goldman Sachs.

Hi. Thanks for taking the question. 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, Terrence, 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 you know, 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 percent of the new cancer medicines are available to Medicare patients here in the U.S., and that compares to about 65 percent of the same medicines being available in France. And by the way, in France, they're available some 21 months later. So a cancer patient, that can mean the difference between life and death. So we're not in favor of a rule like this 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.

And our next question is from line of Ying Huang from Bank of America, Merrill Lynch.

Hi, thanks for taking my questions. My first question has to do with the new lobster trend. So year over year, sales came down by 12 percent, units went up by 1 percent, inventory went down 3. So by my math, the net price is probably coming down by roughly 10 percent. Can you comment on the pricing trend for the rest of the year for new lobster? And then can you quickly provide an update on the Ambro pattern ruling against Sandos? Thank you.

So Ying, I'll take the first one, and then I'll ask Bob perhaps to talk about the other question regarding Sandos and Ambro. I think overall we're pleased with how we're performing in the market despite two biosimilar competitors against New LASTA. In particular, we see good durability of our on-pro business, which is holding at around 60 percent share of the long-acting Fulgrastam franchise. We also continue to compete at an -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.

And our next question is from Jeffery Porges from Learing Partners.

Thank you very much. And first question, David, just on the KRAS, could you help us understand how, in terms of expectations, how treatment response to this particular intervention should compare to other mutations in lung cancer that we're accustomed to seeing, for example, ALK or EGFR? And just is it likely to be as canonical, if you like, as those mutations? And then secondly, Murdo, if you could just give us a little bit more color on AMOVIG in particular. It does look as though you've come under some pressure in terms of share of new prescriptions. Is that a one-time event in the first quarter that we're seeing in the prescription data, or has there been a step down because of the contract and is this the new baseline? Thanks.

Sure. I'll go ahead and start with the question regarding KRAS biology. You know, I think there's probably no specific answer for that, Jeff. You know, 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'll sort out. 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. You know, as you know, we're still the market leader with 60% TRX share, around 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 AMOVIC through commercial insurance benefits. So what we are seeing in our trends in our prescriptions is some effect of the bolus of patients that we secured when we first launched into the market and working them 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. We'll be looking to see how that shapes up in the real world as we move forward.

And our next question is from Kenan McKay from RBC Capital Markets.

Hi, thanks for taking the question. Quick R&D question. You mentioned Tezabalumab phase two, moving forward in atopic derm. Hadn't Tezabalumab missed a primary endpoint in the prior phase two A in AD, and what's sort of the difference in how you're thinking about this in AD or how has this evolved?

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

And our next question is from line of Carter Gould from UBS Equities.

Afternoon, guys. Thanks for taking the question. I want to change the pace for a second and ask one on the omicampive progress you've been making. Specifically, are there any additional planned interim analyses either for futility or stopping early for efficacy? And then just maybe your initial thoughts on how this, you think this may be positioned in HF, maybe alongside Intresto. Thank you.

Sure. This is Dave. I'll take that question. So, you know, typically in these trials there are interim analyses for efficacy. They are event-driven and, you know, will communicate at the appropriate time as we might expect those data. You know, I think one of the things that excites us about omicampive 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.

And our next question is from Yaron from Cohen & Company.

Great. Thank you. So, David, I have also a follow-up on KRAS. Can you give us a little bit of a sense, was this a typical 3x3 dose escalation or are you doing interpatient escalation and would you break out the results by tumor type as well? And then I have a quick question from Sunsepar.

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

Yaron, your line is still open.

Can you hear me? Yes. Sorry. Go ahead. Sorry. Go ahead, Yaron. Okay. Great. Or can you give us a sense, are the launchers for Sunsepar, are they Zytus and Pyramel and are they still subject to the litigation coming up in June? Thank you.

Yeah. So what I'd say, this is Malin. 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.

And our next question is from BMO Capital Markets.

Good afternoon. Thanks for taking my question. 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, Dole, for the question. It's mortal. What we're seeing in Europe in general in the biosimilars market is more rapid penetration of the biosimilars of the innovator compounds. 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 prices 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 -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.

And our next question is from line of Jay Olson from Oppenheimer.

Well, hey, guys. Thanks for the warm welcome and thank you for taking my questions. 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 CV trial and how that study may impact the 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 AMOVIG? Thank you.

Dave, you want to get both of those? Yeah. Well, I'll get half of the Repatha question and then Murdo will take the other one and I can address AMOVIG 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 continue 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. 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 AMOVIG data at the American Academy of Neurology meeting, which is starting in four or five days, we do have what I think there's some very interesting data on 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 of AMOVIG, given that patients who got to that higher dose tended to do even better on conversion.

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

And our next question is from the line of Michael Yee from Jefferies.

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 NREL, 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 AMOVIG. I think 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 AMOVIG 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 have 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 court, and that's where we are. But as I said, that'll 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.

And our next question is from Alethea Young from Cantor Fitzgerald.

Hey, guys. Thanks for taking my question. I just wanted to talk a little bit about the biosimilars business. I know you had put out kind of a longer-term guidance consort around the $3 billion number, but I just wanted, now that we have some biosimilars on 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 wanted you to kind of frame some of the puts you make, so we can think about potential longer-term value of that business. Thank

you, Alethea. Obviously, it's still very early days in the U.S. Based on our European experience and what we continue to believe the market outlook is in the U.S., I 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 U.S. in the -too-distant future.

And our next question is one of Corey Kasimov from JPMorgan.

Hey, good afternoon, guys. Thanks for taking the question. I wanted to ask on a MOVIG, 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 an impact issue. Thanks.

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 and efficacy 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 incidents of constipation are labeled, and it'll even be reported in the long-term follow-up data at AAN. So I think it's been well characterized in good, well-designed, open-label 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 Amavig and persisting. I think some of the other things we're seeing in persistence, and I mentioned it in response to an earlier question, are just as we, 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 switched away to other agents. So there's still an evolving understanding of how persistent patients are to your question on discontinuation of Amavig. 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 Murdoch 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.

And our next question is from Jeffrey Meacham from Barclays.

Afternoon, guys. Thanks so much for the question. I 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 a registration phase, too? I just wasn't sure if this was even an option or if there had been discussions with regulators on this. Thanks.

Yeah. You know, 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, you know, potentially, you know, 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.

And our next question is from Umar Rafat from Evercore ISI.

Hi. Thanks so much for taking my questions. 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 you intend to show. Should we be expecting a dose response? And then separately on EMBREL, 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 there. Umar, let's just try. So, you know, in relation to, you know, KRAS, again, the clinical data will present, so I won't comment on the specifics of dose response. You know, I will say that, you know, 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 we'll present complete details in about a month at ASCO.

And Umar, on your question regarding EMBREL, we did have a strong quarter on EMBREL. It was primarily driven by a strong market, KRAS rheumatology, and we did see some net price increase as well as improved contracts in the new year.

Okay. We have time for one or two more questions. Why don't we?

Yeah, Ian, let's send, you know, as past 6 p.m. on the East Coast, let's take two more questions.

Very well. Our next question is from Ronnie Gall from Bernstein.

Good afternoon, guys, and thanks for fitting me in. Two, if I may, first, if you can break for us the relative sales of Cain-Giovida and M.Giovida just trying to keep track on those molecules individually. And second, in a Movic-Mordeaux, you mentioned that you're expecting net price stabilization of this molecule. And I was kind of wondering about this comment. It seems like the payers have not really selected their preferred agency yet. Even if I just added Teva backhand. So I was wondering if there wouldn't be another step down in pricing expected when they choose the preferred agents. And then with Oral scumming about a year out, wouldn't that cause another step down in pricing at that point? So I'm just, can you put this comment in context?

Thanks, Ronnie. Yeah, we're not breaking out 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 Amovic, 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 would be my clarification

to your question. Ian, let's take one last question after which Bob will make some closing comments.

And our last question is from Salim Said from Zuo Securities.

Yes, guys. Thanks for taking the question. I guess one for me, multi part one on RAPATH on the new CVOT trial, I guess maybe if you could just give us some color on what the genesis of the design of that trial was given. It seems to mimic medicine companies or Ryan for almost like line for line. And should we be thinking of that as a validation of in clitorin's value proposition in the marketplace as we think about long term RAPATH sales? Thank you.

Yeah, you know, I'll be happy to address that question. I mean, that's, you know, 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 in clinical perspectives that go into study design. You know, we weren't using anyone else's trial as 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 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. Great. Thanks, everybody. If you have any follow on questions, if we didn't get to your question or a few comments you would like to discuss, feel free to reach out to me or other members of my team. Thanks again.

Ladies and gentlemen, this does conclude Amgen's first quarter 2019 financial results conference call. We thank you greatly for your participation. You may now disconnect.