Amgen Inc.

My name is April and I will be your conference facilitator today for Amgen's third quarter 2020 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, press star, then a number one on your telephone keypad. To withdraw your question, press the pound key. I would now like to introduce Arvid Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Okay. Thank you, April. Good afternoon, everybody. I, together with several members of our leadership team that you will hear from today, would like to welcome you to our Q3 call. The format of our Q2 call was very well received, so we'll stick to keeping our prepared comments to a minimum and limit the overall duration of the call to one hour. The slides have been posted. Just a quick reminder that we use non-GAAP financial measures in our 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 our Chairman and CEO, Bob Bradley. Bob?

Okay, thank you for joining today's call. I'll take a few moments to discuss our performance in the third quarter and then share some thoughts on the overall operating environment in a COVID context. We delivered another strong quarter. You can see that in our revenue growth of 12%. And in addition, Once again this quarter, our revenue growth exceeded expense growth, enabling us to report earnings per share growth well ahead of revenues. Putting the results in a broader context, our double-digit increase in revenues was driven by the continued volume-driven growth of many of our innovative products, the strong uptake of our high-quality biosimilars, and the relative stability of our base business, which is proving resilient in the face of increased competition. We expect these three factors to be key for our long-term success. Turning to COVID-19, clearly the pandemic remains an important factor affecting performance for Amgen and for our industry. You'll recall that Amgen grew revenues by 11 percent in the first quarter of the year, with the first 10 weeks of performance largely unaffected by the pandemic. In the second quarter, when conditions were at their worst, revenues grew by 6 percent. Our performance in the third quarter reflects an encouraging recovery from the depths of the pandemic and was largely consistent with what we anticipated for you in our remarks at the time of our second quarter call. As regards the fourth quarter, we see the current resurgence in cases as a potential headwind for our business, and we are closely monitoring this to see what the impact may be for the rest of the year and if there might be any spillover into 2021. We don't expect anything like what we saw earlier in the year, as global healthcare systems know much more about how to treat COVID-19 and are better prepared to do so than they were earlier in the year. However, on the margin, we're not ruling out that there will be some impact, and we've tried to incorporate this into our planning assumptions for the fourth quarter and into the beginning of next year. Overall, I remain optimistic that innovation from the biopharma industry will break the back of this pandemic with vaccines, antibodies, and other therapeutics that are being developed with unprecedented speed and collaboration. One thing this pandemic has exposed is the importance of innovation. And that, of course, is at the core of our strategy, and it's reflected in the first-in-class molecules that are advancing rapidly in our pipeline. We're pleased, of course, with the Phase II results of our first-in-class molecule, sotiracib, and we expect to see top-line Phase III data for tezupelumab, a potential first-in-class treatment for severe asthma by year-end. We're also making good progress with several of our half-life extended-bite molecules, particularly in solid tumors like prostate and small-cell lung cancer. All the work that we do is taking place at a time when more is expected of companies than ever before. We understand these expectations and are committed to good corporate citizenship and sustainable operations. Before I turn things over to the rest of the team, let me thank our staff members around the world for their unwavering commitment to serving patients during this challenging time. Their resilience, creativity, and ability to execute give me great confidence in our long-term future. Dave?

Thanks, Bob. I'll begin with Sotiracib, our first-in-class KRAS G12C inhibitor. Based on the data we have accumulated and the evolution of the field, we are extremely optimistic about the potential of Sotiracib and will continue to aggressively advance the development program. Earlier this month, we reported positive top-line results from our Phase II monotherapy study in advanced non-small-cell lung cancer, demonstrating an objective response rate consistent with our Phase I data at 960 milligrams and promising results on other measures of efficacy, including duration of response, with more than half of the responders still on treatment at the data cutoff. Safety and tolerability were similar to previously reported data for this population and have been remarkably consistent across the 160 patients treated with our Phase II dose. Our Phase I and Phase II data are based on protocol-specified intent-to-treat criteria, as is our practice, and the scans to assess efficacy parameters in Phase II have been evaluated by independent central review. We look forward to presenting the Phase II results at the World Congress on Lung Cancer, taking place in January. We also reviewed with interest a data presentation made a few days ago. Based on our assessment of available efficacy and safety data, including durability measures, we remain extremely confident in our molecule. To date, we have treated over 550 patients with Sotiracib, and we are looking forward to discussions with the FDA and other regulatory agencies to determine the best path forward as monotherapy in patients with advanced lung cancer. We couldn't be more enthusiastic about our position as we move towards establishing Sotiracib as a KRAS G12C foundational therapy. We also remain optimistic about our bite platform. We now have evidence of clinical activity in solid tumors, including recently presented prostate cancer data from AMG160, which targets prostate-specific membrane antigen. The benefit-risk profile AMG160 has continued to improve with additional dose optimization. AMG757 is our half-life extended bite targeting DLL3, which is a very attractive target due to its differential expression in small cell lung cancers, and we look forward to presenting initial data at the Society for Immunotherapy of Cancer annual meeting next month. Small cell lung cancer is a large unmet medical need globally, and yet treatment options have not advanced significantly in decades. We will also investigate AMG757 for the treatment of neuroendocrine tumors. We expect to present data from AMG701, targeting BCMA for multiple myeloma, later in the year as well. And before leaving the BITE platform, I wanted to mention a Phase II publication in the New England Journal of Medicine that reported deep responses and a tolerable safety profile for dasatinib induction, followed by bruncitoconsolidation in adults with Philadelphia chromosome positive ALL. Sixty percent of patients achieved a molecular response, and disease-free survival was 88% at 18 months, highlighting the potential of a chemotherapy-free regimen. If these results are confirmed in larger trials, this could lead to a potential paradigm shift in the treatment of this disease. In cardiovascular disease, we recently released the top-line results from our Omicamptomacabral Phase III Outcome Study, and the results will be presented at the American Heart Association Scientific Sessions in November. In inflammation, along with AstraZeneca, we look forward to the top-line results of the pivotal tezopelumab phase 3 study navigator in patients with severe uncontrolled asthma, which remains on track. We also expect the results from the oral corticosteroid-sparing phase 3 study source by the end of the year, which should complement the pivotal data. I'm happy to announce that we will be advancing our third inflammation program into Phase II development next year with AMG592, now named Afavalucan-alpha, our IL-2 mutine for systemic lupus erythematosus. The trial was selected for inclusion in the FDA's Complex Innovative Trial Designs pilot program, which supports the development and regulatory review of novel clinical trial designs for new therapies. I would like to thank all of the Amgen teams for executing at such a high level during the ongoing pandemic.

Murdo? Thanks, Dave. We've seen volumes continue to improve from the initial stages of the pandemic, with Q3 global revenues growing 12% year over year, driven by 18% volume growth. During Q3, physician-patient interactions increased to near pre-COVID levels across the industry in the U.S., total prescriptions are still down approximately 2% and physician visits, either in person or remote, are down approximately 10% versus the pre-COVID baseline. While trends improve during the quarter, we are seeing infection rates rise in many parts of the world, which may bring additional quarter to quarter variability. Let me spend a few minutes to discuss our Q3 performance and outline our expectations for the remainder of 2020. In bone health, our efforts are focused on ensuring patient continuity. We grew prolia volume by 10% year over year, even though osteoporosis diagnosis rates have returned to just 70% of pre-COVID levels in the US. COVID has also resulted in a change in historical quarterly trends for prolia. Prior to the pandemic, the first and third quarters each year had lower sales than the second and fourth quarters. However, given the impact of the pandemic in the second quarter and the six-month dosing regimen of Prolia, we would expect year-over-year growth rates in the fourth quarter to be lower than pre-COVID growth trends. With the current rise in COVID infection rates in the U.S. and Europe, there could be additional delays in patients receiving their Prolia treatment in Q4. Eventity sales in the U.S. grew quarter-over-quarter driven by 30% volume growth. This growth was offset by lower sales in Japan, which were partially related to timing of purchases by our partner, Astellas. We believe Avenity's unique bone-building abilities will continue to drive growth in our business as physicians appreciate its benefit-risk profile in treating their post-fracture patients. Repatha sales increased 22% year-over-year, driven by 60% volume growth. and is the segment leader globally. We remain confident in our ability to grow Repatha, given the significant unmet medical need in treating high-risk cardiovascular patients, our comprehensive pair coverage, the convenient self-administration, and established outcomes data in the label. Moving on to Parsabiv, which is an attractive treatment for secondary HPT, supported by the convenience of its IB administration. In January 2021, reimbursement for parsibiv will move into the dialysis bundle payment system. We've already begun to see some negative impact on parsibiv utilization in the US, and we would expect this impact to continue in Q4. Transitioning to our inflammation portfolio, total prescriptions for Otezla in the US grew 11% year over year. Underlying volume trends remain strong. Sales were negatively impacted by lower inventory levels versus last year. We're confident that Otesla will continue its double-digit year-over-year volume growth based on its well-established safety and efficacy profile, convenient oral dosage, broad pair coverage, and the lack of lab monitoring requirements. Embrel remains the cornerstone of our inflammation franchise, and we continue to invest in Embrel along with our broader inflammation portfolio, including Otezla, Amgivita, and recently launched Avsola. Enbrel was impacted by slowing growth in rheumatology prescribing in Q3 related to COVID and experienced some share loss in the quarter while maintaining price stability year on year. Continued softness in rheumatology prescribing related to rising COVID infections could further impact Enbrel in the fourth quarter. Our Q3 biosimilar revenues were $480 million, supported by ShareGrove, by Invasi, and Kenjinti. We've achieved leading biosimilar shares for Amgevita in Europe and for Invasi and Kenjinti in the US. Our highly efficient operating model and full complement of patient services provide an important advantage as we face additional biosimilar competitors heading into 2021. In oncology, Neulasta OnPro remains the preferred long-acting GCSF with 55% share of volume in the quarter. Neulasta sales decreased 22% year-over-year driven by declines in volume and net selling price. Competitive activity in long-acting Fulgrassum is impacting average selling price. The most recent published average selling price for Neulasta in the U.S. declined 19% year-over-year and 6% quarter over quarter. Overall, I'm very pleased with our Q3 performance. We remain vigilant as the pandemic continues to create uncertainty and potential disruptions in the healthcare marketplace. Amgen employees around the world are focused on ensuring continuity of care for our patients and will continue investing to drive growth of our innovative products, advance our geographic expansion, and prepare for potential new product launches. And with that, I'll turn it over to Peter.

Thank you, Murdo. Consistent with the first half of the year, we executed effectively during the third quarter, delivering 12% revenue and 19% non-GAAP EPS year-over-year growth. As you heard Murdo say, revenue growth was driven by volume increases of 18%, consistent with our focus on volume-driven growth. Third quarter non-GAAP operating expenses increased 10% year-over-year and 9% quarter-over-quarter as we accelerated our investments to drive growth and advance the pipeline. Although activity levels during Q3 were still partially impacted by COVID-19, most trials continued to enroll patients, customer-facing commercial activity levels increased, and launch preparations were in process. We see activity levels increasing in the fourth quarter of the year, resulting in increased investments. We have financial flexibility with $12.4 billion in cash and investments on our balance sheet and continue to generate stable free cash flow with $3.2 billion in the quarter. Additionally, our third quarter dividend was $1.60 per share, an increase of 10% over last year. Our capital allocation principles and plans remain unchanged and uninterrupted. Let me now share some thoughts on our 2020 outlook going forward. We are narrowing our revenue guidance to 25.1 billion to 25.5 billion, from 25.0 billion to 25.6 billion. The range reflects the uncertainty created by the recent resurgence of COVID-19 infections globally, which Bob discussed in his remarks. And as you just heard Murdo say, our products, including Prolia, for the most at-risk COVID patients are most susceptible to the accelerated rate of infections. The lower end of our range takes into account a more accelerated impact from COVID globally. We are raising our non-GAAP earnings per share guidance to $15.80 per share to $16.15 per share, versus our prior guidance of $15.10 per share to $15.75 per share. We continue to believe that we could experience fluctuations in our quarterly revenues and earnings over the duration of the pandemic. As we shared during our Q2 call, we expect full-year total non-GAAP operating expenses to grow in the high single-digit percentage range year over year on an absolute basis. We expect fourth quarter non-GAAP operating expenses to grow at about 20% on a quarter-over-quarter basis. Now let me share a bit more detail on our non-GAAP expectations for the full year 2020. Cost of sales as a percent of product sales will be generally consistent with 2019. We plan to increase R&D investments in the fourth quarter of the year as clinical trial and laboratory activities continue to recover from COVID-related slowdowns. SG&A spend is projected to increase due to investments in Otesla and other growth brands, geographic expansion, and launch preparations. We anticipate other income and expense to be a net expense of about $1.3 billion. which includes more than $130 million of benefit from mark-to-market gains on our equity investment portfolio in Q3. We are updating non-GAF tax rate guidance to 13% to 14% versus prior guidance of 13.5% to 14.5%. Our expectations for share repurchases are unchanged. at the lower end of our previously disclosed range of 3 to 5 billion. Finally, recall that Q4 of 2020 will be comparing against a partial quarter of Otesla sales and expenses in Q4 2019. So, as we approach the end of 2020, we are pleased with our progress and execution this year, including the successful integration of Otesla, collaboration with Beijing, and transition from Astellas in Japan. As is customary, we will provide full 2021 guidance on our January call. This concludes the financial update. I'll turn it back to Bob to get going on Q&A.

Okay, April, why don't we open up the lines for questions, and perhaps you could start us by reminding our callers of the procedures for asking a question.

Yes, sir. As a reminder, to ask a question, you will need to press star on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And your first question comes from the line of Michael Yee from Jefferies.

Hey, guys. Thanks for the update. Really appreciate it. I had a question on tezopelimab. Of course, a really important readout coming soon, and it's an important drug. Just wanted to understand David's perspective on the importance of the low eosinophil group and in the context of the overall data and how important that is to hit there and how that would change the overall profile and outlook for that drug. Thanks.

Thanks, Mike. Yeah, and, of course, we're greatly looking forward to that readout as well. What I can say is that, you know, the trial is very well-powered to look at Outcomes on the primary endpoint here is annualized exacerbation rates, the standard endpoint for asthma studies across the different subgroups, including the low eosinophil population. So we feel, you know, very comfortable that this will be a definitive test of tezopelumab across the entire range of patients with severe asthma.

Matthew Harrison from Morgan Stanley.

Great. Good afternoon. Thanks for taking the question and thanks for the update. I guess another question for Dave. Could you maybe just comment? I know you commented on your opening remarks here on I guess the question here is, as we think about moving the response rate higher in terms of the combination studies that you have ongoing, what's your relative confidence around those studies, either improving response rates or improving durability, and how do you think about your ability to progress them rapidly now that you have a good sense of the monotherapy activity of the compound? Thanks.

Thanks, Matt. You know, certainly the combination studies are an important topic. They're moving forward quite briskly. We have, I think, seven cohorts open now. Three or four more are coming very soon. So we feel we are testing, you know, in a range of indications the biologically plausible and clinically relevant combinations. We'll have data next year on a number of these And to your point, the goal always in combination therapy beyond monotherapy is to enhance efficacy and potentially in terms of response rates, but also durability if you are cutting off avenues of tumor resistance or escape. And that's certainly our goal. We're very much guided by the biology here. And as you look at those cohorts that are coming up, I think you'll see that that's the case.

And next question comes from the line of Yaron Warber from Cohen.

Yes, great. Thanks for taking my question. David, I'm just going to maybe keep you on the spot on Sotorosib. Some of the data or comments that we heard this week is that a competing product was well tolerated at the high dose with an EGFR inhibitor and Pembro. If I remember correctly, at ESMO, I think your investigator said something along the lines, and correct me if I'm wrong, that with your product, with PD-1, there was tolerability, but it was addressed with dose reduction, something along those lines. I don't know if you don't mind maybe exactly kind of correct what he said. And then secondly, on tezopelomab, our understanding is that the way the study is designed, it's actually incorporating the low eosinophil dose into one of the analyses in the primary endpoint as a sub-analysis. And so if you hit that Does that mean you get a broad label? Thank you.

Yeah, sure. So, you know, let me take those in order. You know, in terms of the combinations, one thing I would caution everyone is let's not over read anything into cohorts of three or four patients, whether that's our trials or anyone else's trials. You know, we're moving forward. We've been, you know, what we have is a foundation of tolerability and monotherapy which is the critical thing to build on in combinations. And, you know, I think this was put into some perspective by an editorial in the New England Journal of Medicine that accompanied the publication of our phase one trial a few weeks ago, and I'd refer you to that. And certainly, you know, it's very common in combination therapy development in oncology to look at all sorts of dosing and scheduling regimens, and we fully intend to do that, and a priori we would intend on doing that. With regards to the analysis in tezopelumab, yeah, that's correct. I mean, the analysis is powered and geared across the entire population, and with also a look at the low eosinophil population, so your suppositions there are correct.

And your next question comes from the line of Jay Olson from Oppenheimer.

Oh, hey, congrats on the quarter, and thank you for taking the question. I just wanted to follow up on the comments around KRS-G12C. The competing program that featured data over the weekend did report QT prolongation, including some cases of grade 3-4. Is this a class effect? Have you seen any cases of QT prolongation with sotiracib? And how important is this cardiovascular safety finding in this patient population? Thank you.

Yeah. You know, while I can't speak directly to others' data, of course, I'll allow them to do that. I will say that we've, as I mentioned, treated over 550 patients. There's no evidence whatsoever of a QT signal to date. And we remain quite pleased with the overall tolerability of soda acid.

Your next question comes from the line of Terence Flynn from Goldman Sachs.

Great. Thanks for taking my questions. Maybe I was just wondering if, as you think about capital allocation, if the Omicamptive setback maybe changes anything on that front, particularly how you think about the cardiology opportunity for the company. And then a question for Peter was just wondering if you could give us a preliminary view of 2021 expenses just relative to this year. Just wondering if you're wrapping up a number of late-stage programs now, why spend would grow next year? Thank you.

Hey Terrance, it's Bob. Why don't I take the first part of your question. The answer, short answer is no. The element captive results don't change our thinking on capital allocation. We continue to look for business development opportunities and continue to look for internal programs in cardiovascular disease. As you know, we're moving rapidly with our phase two program directed against Lp little a. So we're excited to have some advanced studies going for that molecule. And we'll continue to look for ways to invest in that franchise. Cardiovascular disease, as you know, the leading killer of people on the planet. We continue to think what we need in that field is more innovation, not less. So we'll continue looking for that.

Terrence, it's Peter. Thank you for your question. A good question. As you know, we'll guide on 2021 when we get to January, but I do want to just say, you know, we always intend on continuing to be a top-performing biopharma firm, looking at various financial metrics, always operating margin right there. So, look, we're going to remain flexible and adaptable as attractive opportunities arise and with the underlying objective to grow our after-tax cash flows. So, that's where we sit right now on expenses. We wanted to be clear on the fourth quarter and how that's going to sequence in, which is really on a normal historical basis, just at the upper end of it on an OpEx basis. So with that, I'll turn it over to the next question.

Next question is from the line of Evan Sigerman from Credit Suisse.

Hi guys. Thank you so much for taking the question. Actually one for Murdo, kind of on some of the dynamics in the biosimilar business. So you're talking about pricing headwinds as volumes increase. are you seeing this more in the inflammation space or is this an oncology? And can you kind of provide some color as to how accounts generally, I guess, in the U.S. are using biosimilars? Is it more just totally, you know, forgetting the brand and going all to the biosimilar, or do you see some sort of a mix? Thank you so much.

Thanks, Evan. Yeah, look, we're really pleased with what we've been able to do with our biosimilars business in the quarter. We were – The team's done a really nice job this year, despite COVID, in establishing strong penetration into the U.S. oncology market with Invasi, our Vastin biosimilar, and Kanjinti, our Herceptin biosimilar. I would say, with respect to the dynamic in the market, a lot of people questioned whether or not we had an efficient, functioning biosimilar market in the U.S. because I think they were over-interpreting some of the early biosimilar launches. And I think what you can see now is that we have an efficient market that when there's a clear value on the table, healthcare systems, providers, and payers are able to capitalize on it. And that's what's driving, of course, the uptake of our biosimilars. I also think that the experience we've had in defending against biosimilar erosion on products like Neulasta has positioned us well to understand how accounts are looking to purchase biosimilars. So when we launched our own, we were able to take some advantage of that. And I would say that of the accounts that have opened up biosimilar usage, generally, initially, we thought they might be using biosimilars for new patients going forward. But we've actually seen them use our biosimilars both for new patients and switching patients who are mid-course of treatment to biosimilars as well. So I'd say that the penetration at an account level, has been deeper than we originally anticipated. And I think by now there's fairly broad adoption in the U.S. at the 340B level, the non-340B level, and, of course, within the clinics. Now, that's oncology. It's a little different in inflammation depending on the biosimilar itself, whether it's an infused biosimilar or whether it's a self-injected or self-administered biosimilar. And I think need to watch that carefully because the two are not analogous. So I would treat each business segment as its own example and not draw comparisons from one to the other.

Thank you so much.

April, go ahead. April, are you there?

Sorry, one moment.

April, what's happening?

All right, and your next question, sorry about that, is from the line of Chris Raymond from Piper Sandler.

Thanks for taking the question. Yeah, I was wondering if I could maybe ask on Satoris again and take the conversation back there. So I heard, David, your commentary on, you know, hopes on the response rate in combo, but I think you guys are also working on a BID dose. And if memory serves, I think we were – maybe we were expecting to see something by year end or at least in the coming months. So I wonder if you could, you know, sort of talk about your hopes there with respect to that potential as a monotherapy, you know, BID. And then also on the same topic, can you just sort of confirm, does Sotirisib have CNS activity? Can you give us any indication on that one? Thanks.

Yeah, thanks, Chris. Both important questions. You know, it's standard in any new molecule as part of a clinical pharmacology program to examine different schedules, so we continue to do that with twice-daily dosing. But one thing I'd urge everyone to do is kind of go back to basic pharmacokinetics here as we think about this field, and what are the reasons to go to split dosing? Well, there are really two reasons. One, if you need split dosing in order to achieve target coverage, or two, if you need to split the dose because of tolerability issues. And With sotiracib, we're very convinced that we are getting target coverage throughout the dosing interval with our once-daily dosing. And, of course, we've got very nice tolerability at once-daily dosing. And so that's really it. This is, I think, basic pharmacology and pharmacokinetics and the science underlying that that has driven our clinical choices. In terms of CNS penetration, we did mention at ESMO we have a couple patients with one or two patients with CNS metastases who clearly had responses. So the question with small molecules or in CNS responses in general is always, is that due to true penetration or because there's typically a highly disrupted blood-brain barrier in that setting, you almost always get some exposure to drug. The third potential explanation which we continue to explore is that it's a secondary immune activation that could potentially trigger activity in the central nervous system. We are exploring this question explicitly in a cohort that we're just opening. for patients with brain metastases. And so I think in through next year, we'll have a good sense of potential activity in the central nervous system.

Thank you. And your next question comes from one of Jeffrey Porges from SVB. Please go ahead.

Thank you for the question. This is Andrew for Jeff. So I have a question regarding tezopelumab's readout. So if the study is successful, how might it be commercialized given the conflict that your partner has with the for the same indication? Thank you.

Yeah, thank you. I'll jump in on that one. We've obviously been very transparent with our partners on how we can commercialize tezopelumab. I have to say with With the many years of experience that AstraZeneca has in this therapeutic area, we continue to believe they're an outstanding partner. We've worked through all the details of commercialization. AstraZeneca will indeed be putting up dedicated resources for the promotion of tezopelumab. So think about different sales reps literally in the market promoting the two different products. We will be handling many elements of the commercial process in the US. For example, we'll be lead on the market access negotiations and relationships, while AstraZeneca will lead on consumer marketing and professional marketing. So I think we've really put the best of the best together here, and I continue to have a lot of confidence in the emphasis that our partner is placing on this really exciting molecule. both for the launch and also just strategic lifecycle management ideas that they have as well.

Thank you.

And your next question comes from the line of Ron Eagle from Bernstein.

Good afternoon, and thank you for taking my call. You've done really well with Basimor. You're closing in on about $2 billion run rate, up from about $1 billion last year. I'm kind of wondering about the balance for next year. You're seeing significant competition coming in on both the Avastin and Herceptin biosimilars. You're launching to yourself and Rituximab and Fliximab, but the dynamics seem to be potentially tougher. If we're going to think about the next 12 months, can we expect the same kind of growth rate, or is this asking for too much? And then separately, Murdo, I was wondering if you can comment on Rapasa Outlook and how do you think about the competition with an RNA-based physician, office-based molecule?

Okay, thank you. Overall, I think the biosimilars business, as I said, has evolved really nicely. We've penetrated quite well. If I look at the oncology products in the U.S., running at 44%. share currently on our Avast and Biosimilar. I do think as you see additional competitors come in, the average selling price will come down. So that's a reality that competition brings, and it's related to my comment earlier about this being an efficient marketplace. I do think there's an appreciation, though, for what we've done at Amgen, which is to have a very effective provider-focused commercial presence, the same people that are that are talking to accounts about our innovative portfolio are talking to those same customers about our biosimilars. So all of our services that we normally have on an innovative product are available on biosimilars. And that includes patient services for things like reimbursement or copay assistance. And I think that differentiates us. So I would anticipate us being able to continue to capture good volume, albeit at some price erosion as we go into the new year. But as I said, we're at 44% share of the total Bevacizumab market and slightly less than that of the Trastuzumab market. So there's still a lot of headroom for growth. And I think on the inflammation side, the dynamics are a little bit different depending on whether it's a product like our Remicade biosimilar Afsola or whether we're looking at a product like our Rituxan biosimilar. So I think we have to watch how we draw parallels on expectations. Overall, we've made a big commitment to biosimilars, so we'll continue to advance new products through the clinic and into the market, and we compete effectively across Europe, and we're competing nicely so far in the U.S. Just transitioning to Repatha, look, we've done, I think, an excellent job of converting to an affordable price of Repatha. We've got about 80% access coverage across Medicaid and commercial. And we're seeing really nice volume growth with 60% in the quarter. And I think we're also seeing some nice evolution outside of the U.S. where Repatha continues to gain share. The product, you know, really with Repatha, we are scratching the surface of those that need this. There's a lot of high-risk coronary event patients who require more aggressive lipid-lowering therapy. And In light of COVID, I actually think that Repatha is a unique solution. It's a self-administered product with excellent coverage, a well-demonstrated efficacy and safety profile, and we have event reduction data in the label. So I think, you know, compared to a product that might require patients to travel to a physician office for administration in light of COVID, that's going to be a tougher task for another product to come in. So I feel good about where we are, and I feel good about our growth prospects going forward.

Your next question comes from the line of Colin Bristow from UBS.

Good afternoon, and thanks for taking the question. So another one on Sotirative. I'm just curious, like, you have more data on this asset now. What's your current thinking around the potential to advance this to earlier, I guess, first-line therapy in light of the strong data we've seen from IO agents and the G12C patients? Thanks.

Yeah, no, thanks, Colin. Great question. And of course, you know, as is typical in oncology development programs, you start in later lines of therapy where patients don't have much in the way of treatment options, but certainly moving into earlier lines of therapy will be part of the development program as we move forward. I would also point out that an important part of the program in later lines is the head-to-head phase three trial against docetaxel chemotherapy. That is very important outside of the U.S. in some jurisdictions for regulatory approval, but also in many jurisdictions for reimbursement. And so I wouldn't also overlook the potential of that. This is a global development program, and that's another important piece. Thank you.

And the next question comes from Mohit Bansal from Citibank.

Great. Thanks for taking my question. Maybe one question on tazopalumab and asthma. So as the data are coming up, how important do you think is to show the benefit in low US patients in case if it doesn't work? Do you think your partner may not be interested in commercializing this product given that they already have a product for high EOS patients and they may have two competing . Thank you.

Yeah, well, let me start and then, you know, I'll hand things off to Murdo. You know, as we discussed, you know, the primary endpoint is powered across the entire population, you know, and also the analysis plan allows a look in the low eosinophil group. In our phase two data, which is currently our best predictor, we showed relatively comparable efficacy. regardless of eosinophil status, and it certainly would be our hope that we're able to replicate that in phase three. In terms of commercialization, let me ask Murdo to weigh in.

Yeah, as I mentioned before, there's a strategic commitment here from our partners to TESI. They've been very supportive, constructive, and helpful as we've worked through the development plan, and now we look beyond that to commercialization and potential lifecycle management ideas And I think that there's a strong press from AstraZeneca to continue to really think about all of the patients that we can benefit with development of Tezi. I would just say that there's a large market opportunity here in severe asthma. Having alternative mechanisms in the market is a good thing. And I think that there's plenty of room for us to launch effectively there. And I'm pretty sure that's how our partners at AstraZeneca see it.

Thank you.

And your next question comes from the line of Jeff from Bank of America.

Afternoon, guys. Thanks so much for the question. Murdo, I feel like I asked this one a lot, but on Amavig, what do you think it will take for this product to really break out? I mean, I get it. It's growing on units, but for a new product, it looks range-bound. Is there a meaningful negotiation with renegotiation with payers like you guys did with RAPASA that's going to be required? Or, you know, what do you think it could take? Thanks.

Yeah, thanks, Jeff. Let's narrow or reframe the question. I don't think it's a payer issue. I think we've negotiated very good access for aim of egg. It's covered broadly with very little in the way of utilization management criteria. Physician requests are being filled very well. Our percentage of paid patients is very high now. We're in the high 80% range for paid patients. So it's not an access restriction that's reducing the uptick of the class. There are really two things. One is obvious, it's COVID. We are down substantially in new patients per week because of COVID and a lot of migraine sufferers, unfortunately, are just not seeking care. And neurology as a as a prescribing specialty is down more than some others, like cardiology recovered nicely in the quarter, neurology is still down in terms of total prescribing. And that's the COVID impact. And then there's another, I think, opportunity, which we're focused on, and that is to have both neurologists and patients moving quicker through older, less effective preventative agents and to try biologic CGRPs like Amoveg, and that's really where our focus is for growth. We've seen movement there, and it was going well, but we've still got a lot of work to do, as you point out. But we've got a large volume of patients, over 4 million. I think we're 15% penetrated into that patient population, so there's really no doubt in my mind that it'll move. I also think, by the way, the oral CGRPs are helping here with the promotional effort, communication to patients, awareness building of the benefits of the category. So their acute promotion is also helping in the preventive space. But yeah, we're focused on that. I think we've done all the right things on the communication front to payers. Now we're focused on providers and patients.

And your next question comes from one of Kenan McKay from RBC Capital.

Hi, thanks for taking the question and congrats on the quarter. We're hoping that you could set the record straight for plans with Omecantib and Mercadil. Are there plans to pursue a regulatory filing for the agents? And if so, what is the gating factor? Thank you.

Thanks, Ken. I'll take that. With Omecantib, we issued the top line results. We've got data coming out that the American Heart Association in just a couple weeks. And I think in the wake of that, you know, we'll be discussing next steps.

Okay, April. Let's take the next question, please.

And your next question comes from the line of Emer Ruffet from Evercore ISI.

Hi. Thanks so much for taking my question. I had two here, if I may. First, I know there's a lot of focus on the durational response data as it's evolving in your Phase I and Phase II trials with KRS. But my question is, as we think about one step out in a possible first-line setting, possibly as a PD-1 combination, we know what Keytruda does as a first-line regimen on a duration of treatment and duration of response. I'm curious, what's your expectation that Keytruda paired with a targeted therapy, how much improvement can we see realistically? That would be very helpful, number one. And also, on that same note, as we head into the colorectal data in the first half, knowing that there were, I think, three out of 25 responses in colorectal previously, what are your expectations on what we need to see to be more constructive on colorectal? Thank you.

Yeah, thanks, Umar. You know, so in terms of duration of response in colorectal, you know, in moving in earlier lines of therapy, you know, it's very clear what the checkpoint inhibitors do. I mean, typically, you know, you're going to look for, you know, 25, 30% improvements on these sorts of efficacy measures, you know, to get into the clinically meaningful range. So as we're designing programs, those are the sorts of targets that we would generally look at. In colorectal cancer, as I've mentioned before, we fully enrolled the phase two trial you know, data, you know, next year. That will inform a potential monotherapy path forward. You know, I would want to see response rates perhaps, you know, a little better than we've observed now for monotherapy. But, you know, that will be a discussion with, you know, folks in the field. And here, I would say there's also just a huge amount of emphasis on combination therapy. to both enhance the response rate and then, of course, to generate duration of response. As I mentioned earlier, we've got a number of combination trials either up and running or about to launch, and some of them are directed specifically for colorectal cancer. So we're really looking forward to generating those data, but I think that's the kind of state of play right now.

Thank you very much.

And your next question comes from the line of Alicia Young from Cantor Fitzgerald.

Hey, guys. Thanks for taking my question and congrats on the quarter in progress. Can you talk a little bit about Otesla and what you've seen in light of maybe COVID-19 with it being an oral and I've noticed more kind of marketing, I guess, on the television. Just wanted to get your outlook on price and kind of volume over the next 12 months. Thanks.

Yeah, thanks, Alicia. We've been pleased with Otesla. We continue to see all of our integration activities of bringing that product in being smooth, uneventful, largely now under the management of Amgen employees around the world. And the field force continues to really do an outstanding job of making sure dermatologists understand the benefits of Otezla in the treatment of psoriasis and psoriatic arthritis. I think what we've seen in the quarter is a return to customer activity, largely about 90% of pre-COVID levels. The majority of those customer interactions are in the virtual realm, about 60% of those. I think overall, we're pleased with the growth in volume in the quarter. We did see some one-time events, accounting adjustments. We had a favorable accounting adjustment in 2019 in Q3 and an unfavorable accounting adjustment in Q3 this year, creating an unfavorable compare quarter over quarter from prior year. And we are also seeing a bit of softness in the dermatology prescribing volume year on year on the basis of COVID. But I think the differentiation of having an oral versus biologics versus topicals in psoriasis is really helping us hold up well. And we continue to feel confident about our double digit growth. going forward. We've also held price nicely as we go into 2021. That's a good effect of having a differentiated product. And then overall, I think as we look at sources of growth throughout the world, our international expansion plans have been going well. We secured reimbursement in Australia. Our Japanese business really is doing well. And we're looking at reimbursement and market authorization in other markets. Overall, it's been a really good growth story for us, and we continue to feel good about the future. And then we'll wait patiently to see if we're able to secure a mild to moderate indication next year, because I think that's a patient population that could really benefit from the convenience of an oral and the safety profile that we've established of Otesla versus, say, more potent orals or even biologics.

And the next question comes from one of Corey from JP.

Hey, good afternoon, guys. Thanks for taking the question. I wanted to follow up on Otesla and ask about your baseline assumptions for TIK2, just given the proximity of that data in psoriasis. You know, if those results are roughly consistent with the Phase II data that's been published, how do you think about this potentially slotting into the market and you know, the potential impact it may or may not have on the future trajectory of Otesla. And can you remind us whether the double-digit CAGR expectation you put out there for Otesla contemplates U.S. competition? Thanks a lot.

Yes, I'll answer your second part of your question first, Corey. The double-digit growth assumptions that we put out there did indeed assume – the launch of other orals into the US in a relatively similar timeframe as to what's been publicly disclosed. I think overall, as I was saying earlier, we feel really good about the position of Otesla in the market. It's a widely reimbursed product with really good market access, an affordable product from a patient perspective, a very safe product from an overall profile perspective, and I just think that new entrants into the category will not necessarily differentiate on efficacy or on safety right out of the gate. I think it's going to take some time before dermatologists who are quite frankly leery of potent biologics for other products that might have efficacy but that might travel with some safety concerns and that's not the case with Otezla. familiarity with Otezla, the unique positioning of it being the first product they go to post-optical and pre-biologic, I think is going to hold up really well. And we continue to invest, we continue to invest heavily. Somebody mentioned they noticed more television advertising. We have ramped up DTC given COVID is somewhat disrupting patient behavior. And, you know, also in light of COVID, there are a lot of products in this category that require lab monitoring and Otezla doesn't. So A really good profile, and I think one that will hold up well despite competition.

April is getting to the top of the hour, so let's take one more question, after which Bob will make some closing comments.

And your last question will come from one of Robin Karnaskis from Trues Security.

Great. Thanks for squeezing me in. I'll stay on Otesla. So, you know, I know that the current top goals are not ideal with the side effect profile. I wondered if you could comment on the recent data to pin her off. with a PASI score that looked on par with a Tesla. And my specific question is more, you know, what percentage of a Tesla use is with low surface involvement patients? And do you see these new topicals that are coming out potentially disruptive on a share or price basis? Thanks.

Yeah, thanks, Robin. We really see these as unique segments of the market. The topical segment doesn't necessarily compete with the oral segment. We do see Um, right now we do see some low surface area usage, but I think as we, as we look at our mild to moderate indication in the future, I think there would be more potential overlap with, um, say, let's say more effective topicals for low surface areas and orals, but it's really, it's not impeding our ability to grow. And I don't see them as overlapping sectors. I think when patients say they want the convenience of an oral, uh, it's a very clear choice to go to a Tesla. Bob, would you like to make any comments?

Sure. Just briefly, with nine or so weeks left in the year, we're encouraged that we continue to execute well. I think you see that in the numbers and in the progress that we're making in our market shares and in our pipeline. But we know that this is a year unlike any other, so we're trying to be prudent as we look at the balance of the year and the beginning of next year, particularly as regards to the risks posed by COVID-19. So we appreciate your joining our call. We'll look forward to seeing you or speaking to you in the new year. And in the meantime, Arvind and his team are here for any questions that you might have. Thank you.

Thank you, everybody.

Ladies and gentlemen, this concludes Amgen's third quarter 2020 financial results conference call. You may now disconnect.