Amgen Inc.

My name is Julie Anne and I'll be your conference facilitator today for AMJEN's first quarter full year 2023 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 from the number one on your telephone keypad. To withdraw your question, please press star one again. I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Thank you, Julie Anne. Good afternoon, everyone, and welcome to our call to discuss our results for the first quarter of 2023. Strong unit volume growth that sets up the stage nicely for improved outlook for the balance of the year. These are some of the key themes that you're going to hear about today. Our Chairman and CEO, Bob Bradway, will lead the call with some prepared remarks followed by a broader review of our performance by other members of our leadership team. You should have received a link to our slides that we have posted. Through the course of our discussion today, we'll make some forward-looking statements and use non-GAAP financial measures to describe our performance and just a reminder that actual results can vary materially. So with that, I would like to turn the call over to Bob.

Okay, thank you, Arvind, and let me thank all of you for joining our call. I'll begin by calling your attention to the 14% volume growth we delivered in the first quarter. It illustrates two points worth keeping in mind when thinking about the remainder of the year and beyond. First, the COVID front seemed to have finally turned the page on the pandemic in terms of its impact on the overall healthcare system. For example, we've seen -over-year prescription growth across most specialties in the U.S., including cardiology and oncology, and that's good news because it suggests that patients are returning to their pre-pandemic routines with doctor visits, once again, enabling appropriate diagnoses and treatments. It's obviously something that bodes well for our portfolio of medicines. Second, we're seeing that the demand for medicines is resilient despite the current macroeconomic challenges. Rapatha, Veneti, Blincyto, and Caprolis, for example, all delivered record sales in the quarter, driven by extremely strong growth in volumes of 33%, 55%, 49%, and 18%, respectively. We don't see this volume-driven growth as a single quarter phenomenon either. Rather, we see this as the potential for these medicines and others in our portfolio to reach many more patients over time and contribute substantially to our long-term growth. Take Rapatha. We believe there's tremendous upside opportunity for Rapatha at a time when most high-risk cardiovascular patients still never reach their recommended LDL levels or do so only for a brief, insufficient period of time. The global public health crisis in heart disease demands that all players in the system work together to drive change, and with Rapatha, we have a proven innovation that we know can be an essential part of the solution. Two of our newest medicines, Tespire and Tabneos, achieved -over-quarter volume growth in the U.S. of 28% and 27%, respectively. Tespire has enjoyed strong adoption in the U.S. by both allergists and pulmonologists, and recently approved, excuse me, a recently approved pre-filled pen gives patients the option for self-administration. A few quarters into our ownership of Tabneos, we're convinced that our deep experience in rheumatology and nephrology will enable us to bring this -in-class medicine to many more patients who can benefit from it. Outside the U.S., volumes grew more than 20% in the quarter. In the Asia Pacific region in particular, we generated nearly 50% volume growth as we expand the number of patients we serve in Japan and China, two of the world's most rapidly aging nations, with medicines like Rapatha and Prolia. Amgen's R&D investment was up 12% in the quarter. That growth reflects the investments we are making in registration-enabling trials for several potential new -in-class medicines, including opazirane and heart disease, rocatinolimab and inflammation, and bemrituzumab and terlatumab and cancer. All four of these medicines are quintessentially Amgen. They're innovative molecules that deliver large effect sizes against serious diseases for which new treatments are very much needed. We are pursuing a number of significant new indications for Tespire, Blincyto and Lumicras as well. We look forward to several data readouts from our pipeline, mainly in the second half of the year. We continue to invest heavily in early research, where we've built a differentiated set of capabilities over the past decade, the position as well to take advantage of the rapid convergence of biology and technology that we see happening today. At a time when the world marvels at CHAT GPT, we've been deploying artificial intelligence and machine learning in our research labs for some time now, giving us dry lab capabilities that, when applied to biologics development, have already yielded improved success rates and reduced cycle times beyond our initial expectations. This is indeed an exciting time for biologic innovation. We remain optimistic about our announced acquisition of Horizon, and similar to our experience with Tavernios, the more time we've spent with the team at Horizon, the more excited we've become about the potential to bring Amgen's capabilities and global presence to bear on Horizon's portfolio of -in-class innovative medicines and its pipeline. It's an exciting time for all of us at Amgen, and the demand for innovative medicines has proven to be resilient and growing around the world at the same time that our ability to innovate has never been greater. Always I'm grateful to my Amgen colleagues around the world for their commitment to patients and to our business. Now let me turn over to Murdo.

Thanks, Bob. We kicked off 2023 with strong execution of our mission to bring innovative products to millions of patients globally. We saw record sales for 10 brands in the first quarter with strong volume gains across our general medicine and hematology oncology growth brands. Our inflammation therapeutic area expanded with the U.S. launch of Amgevita and the growth of Tespire and Tavernios. And our announced acquisition of Horizon Therapeutics will soon add several important medicines to our portfolio. Volume growth in the first quarter was 14% with 10% growth in the U.S. and 22% growth outside the U.S. Asia Pacific continues to be our fastest growing region with 47% volume growth in the quarter. Excluding the impact of foreign exchange, first quarter global product sales grew 4%, including the 2% negative foreign exchange impact, product sales increased 2% year over year. Starting with our general medicine business, which includes Rupatha, Prolia, Eveneti, and Amovic. Overall revenue for these four products grew 13% year over year in the first quarter, driven by 19% volume growth. Cardiovascular disease is a growing public health crisis. In the U.S. someone has a heart attack every 40 seconds and we know LDL-C is a major risk factor for heart attack or stroke. However, the state of care for high risk ASCVD patients with elevated LDL cholesterol is shockingly poor. However, we have recently released a real world analysis from the FH Foundation of 38 million high risk Americans showing that fewer than 30% of them ever reached their recommended LDL levels. These statistics emphasize the importance of therapies like Rupatha to address the significant medical need. We're pleased that more and more patients are now benefiting from Rupatha and with volume growth of 33% in the first quarter leading to an increase in sales of 18%, price erosion also slowed in the first quarter and declined less than prior year. In the U.S. volume growth of 32% was driven by broad adoption of Rupatha by cardiologists and increasing adoption by primary care providers. Outside the U.S. we saw 34% volume growth with strong momentum across our international business. There's clearly more work to be done to address this cardiovascular health crisis. This March at the American College of Cardiology we convened the first ever annual LDL-C action summit to address the state of cardiovascular care in the U.S. by identifying strategies and delivering solutions to improve lipid management among the highest risk ASCBD patients. By intensifying the focus on lowering LDL-C a coalition of leading stakeholders in cardiovascular care have come together with Amgen to unite on a bold goal. By 2030 our ambition is to halve the number of cardiovascular events in the U.S. We are confident that Rupatha will play an important role in achieving this ambition. Transitioning to bone health, Prolia sales grew 9% year over year for the first quarter driven by 8% volume growth. Veneti, which complements Prolia in our bone portfolio, had record sales of $254 million for the quarter, primarily driven by strong volume growth across markets. Now to our inflammation portfolio, Otesla volume increased 5% in the quarter. Sales decreased 13% year over year driven by lower inventory levels and price declines resulting from patient and payer mix. Additional rebates were also provided to improve the quality of coverage. Growth of our U.S. Otesla business has been impacted by free drug programs for newly launched and topical and systemic competitors. And we expect new patient demand will continue to be impacted by these programs throughout 2023. Longer term we see strong growth potential for Otesla given its established efficacy and safety profile. Strong payer coverage with limited prioritization requirements and ease of administration. Otesla remains the only approved oral systemic therapy with a broad indication and is well positioned to help the more than 1.5 million systemic, naïve U.S. patients with milder psoriasis that cannot be optimally addressed by a topical and can benefit from a systemic treatment like Otesla. Embryo volumes in the U.S. increased 1% in the quarter supported by improved payer coverage. Several important factors to consider when reflecting on embryo performance in the quarter. Global sales decreased 33% year over year driven by declines in net selling price. Lower inventory levels compared to previous years. And a 9% unfavorable impact of changes to estimated sales deductions related to prior periods. Going forward we expect low single digit volume growth throughout 2023. Lower year over year declines in net selling price. And a gradual recovery in inventory levels. The test spire launch is progressing well with $96 million in sales in the first quarter driven by strong adoption in the U.S. by allergists and pulmonologists. Test spire's unique differentiated profile offers broad potential to treat the 2.5 million patients worldwide with severe uncontrolled asthma without any phenotypic and biomarker limitations. During the first quarter the U.S. Food and Drug Administration approved test spire for self administration in a pre-filled single use pen which offers patients the convenient option to administer test spire at home. This improves accessibility and provides more flexibility in treatment options for all patients in the United States. Sales of tabneos were $23 million in the first quarter. U.S. volumes grew 27% quarter over quarter driven by an increase in new patients starting treatment. In the U.S. tabneos has now been prescribed to over 1,700 patients confirming our belief that Amgen's deep experience in inflammation and nephrology and substantial market presence allows us to bring tabneos to more patients with ANCA associated vasculitis. In the first quarter Amgivita launched as the first U.S. biosimilar to Humira, a medicine used by more than 1 million patients living with serious inflammatory diseases. We saw the first prescriptions to patients being fulfilled this quarter and we're encouraged by the high awareness of Amgivita among gastroenterologists and rheumatologists. With our track record of developing and manufacturing biologics and decades of experience in inflammation, Amgen is uniquely equipped to treat patients with this biosimilar medicine. Looking ahead we expect Q2 Amgivita sales in the U.S. to be lower than Q1 sales as a majority of our U.S. Amgivita sales in the first quarter stemmed from inventory build. Moving to our hematology and oncology business which includes Lumacraz, Kyprolis, Xgeva, Vectabix, Endplate and Blincyto. Sales and volume for these six innovative products grew 21% year over year for the quarter with Kyprolis and Blincyto achieving record quarterly sales. Growth in our hematology and oncology business was supported by important new clinical data. Blincyto sales grew 41% in the first quarter supported by strong adoption across academic and community centers following positive data from the registration enabling E1910 study presented in December of 2022. Vectabix sales increased 16% year over year for the first quarter driven by 15% volume growth supported by positive data from the phase three paradigm trial demonstrating the superiority of Vectabix over Bevacizumab in combination with chemotherapy. Kyprolis continued its strong trajectory with 25% growth in the quarter driven by 18% volume growth. Lumacraz reported $74 million in sales in the first quarter and a 19% increase year over year driven by 40% volume growth partially offset by lower net selling price. Outside the US Lumacraz has been approved in 50 countries and we're actively launching in over 30 markets and pursuing reimbursement in the remaining countries. Sales of our oncology biosimilars declined 27% year over year in the first quarter driven by lower net selling price. While our biosimilars for Mvassi and Kenginti both hold leading shares in the US we expect continued net selling price deterioration and accelerating volume declines driven by increased competition. Over time we expect long term growth in our biosimilars business to be driven by the addition of new molecules and additional launches. Given the strong performance of our hematology oncology portfolio and the recent positive data on blincyto and vectobics as well as ongoing clinical development of Lumacraz in our oncology pipeline I look forward to the future growth potential of this portfolio. As we close out this first quarter of 2023 I'm pleased with our strong execution across our portfolio both in the US and internationally and with that I'll turn it to Dave.

Thanks Murdo and good afternoon everyone. For R&D last quarter was one of high quality execution as we progressed our innovative pipeline with multiple registration enabling studies on track. In general medicine we advanced our cardiovascular franchise in emerging portfolio of obesity molecules with a focus on clinical execution. Let's start with opacirane. Phase 3 outcome study in atherosclerotic cardiovascular disease is enrolling well. In March we presented additional data demonstrating that opacirane markedly reduced Lp-a concentration irrespective of baseline levels in individuals with atherosclerotic cardiovascular disease and Lp-a levels greater than 150 nanomolars per liter. We also initiated the African American Heart Study in collaboration with the Association of Black Cardiologists and the Morehouse School of Medicine. This study will measure the association between Lp-a and atherosclerotic cardiovascular disease in 5,000 African American individuals. African Americans show a higher average Lp-a concentration than white individuals but Lp-a research to date has primarily been conducted in those of European descent. We are collaborating on the African American Heart Study to bridge this gap. Turning to obesity, we are rapidly enrolling a phase 2 study of AMG-133 in patients with obesity with or without diabetes and related comorbidities. The study will investigate different dosing levels and regimens with the overall goal of generating data that will provide broad optionality to design a phase 3 program that will deliver strong, sustainable weight loss. A phase 1 trial of AMG-786, a small molecule targeting non-increting pathways in obesity, is enrolling patients. Multiple preclinical molecules, all with different mechanisms of action than GLP-1 or Gipper based therapies, are also advancing towards the clinic. In inflammation, beyond severe asthma, we are investigating multiple additional indications with Tespire, including separate phase 3 studies in chronic rhinocytositis with nasal polyps and eosinophilic esophagitis. We also have two phase 2 studies, one in chronic spontaneous urticaria and the other in COPD. The CSU study is complete with top line data anticipated in mid-2023. The COPD trial is fully enrolled and has recruited a broad population of COPD patients, including patients with both high and low eosinophil counts. Merging evidence suggests that TSLP is involved in chronic inflammatory disorders, including COPD, and that TSLP may be a key driver of the severe exacerbations experienced by COPD patients. We look forward to the readout of this study in the first half of 2024. For Rocatinumab, potentially first in class antioxidant 40 monoclonal antibody being investigated in patients with moderate to severe atopic dermatitis, recruitment is off to a strong start on the ROCCAT phase 3 clinical development program. This program is a suite of seven studies that will establish safety and efficacy in a broad population of patients with atopic dermatitis, including biologic naive, biologic or JAK experienced, diverse ethnic groups, and adolescents, while also testing different dosing regimens, including the potential for monthly or less frequent dosing. We are encouraged to see Horizon report on the statistically significant and clinically meaningful top line results from a phase 4 clinical trial of TPEZA. As revised FDA label states, TPEZA is indicated for the treatment of thyroid eye disease regardless of clinical activity score or disease duration. Phase 2b studies in systemic lupus erythematosus of Rosivifus alpha and Favuluca alpha were stopped for futility. These studies utilize novel adaptive designs which enabled us to generate decision making data more quickly and cost effectively. SLE remains a challenging area for drug development, one that will be an area of focus for us as we further explore these data sets to advance our knowledge in the field. In addition to our organic pipeline, we look forward to incorporating the Horizon molecules upon deal close to further enhance our efforts to address inflammatory disease. In oncology, global regulatory submissions are planned in the second half of 2023 for E1910, a phase 3 trial led by the ECOG-ACRIN cooperative group, demonstrating that addition of BlinCyto to standard of care consolidation chemotherapy significantly increased overall survival versus standard of care in MRD negative adult patients with newly diagnosed B-cell ALL. Beyond this study, we are investing to move BlinCyto into earlier lines of treatment and to improve patient convenience through subcutaneous administration. DELFI 304, a phase 3 study comparing Tarlatumab, a white molecule targeting DLL3 with standard of care chemotherapy in second line small cell lung cancer will be initiated this month. We'll have top line data from a potentially registrational phase 2 study of Tarlatumab in heavily pretreated patients with small cell lung cancer in the second half of 2023, potential milestone for patients with small cell lung cancer. As you are aware, we are exploring novel combinations with Lumacras. Phase 3 study of Lumacras in combination with Vectabix in third line colorectal cancer is fully enrolled with data readout anticipated in the second half of 2023. We plan to initiate a phase 3 study of Lumacras and chemotherapy in first line non-small cell lung cancer in PDL1 negative patients. At ASCO, data will be presented from studies of Lumacras in combination with standard of care chemotherapy in non-small cell lung cancer and in combination with Vectabix and standard of care chemotherapy in colorectal cancer. We also completed submission of the Lumacras code break 200 data along with data from the In the second half of 2023, we will be sharing initial data from the two-dose comparison sub-study to the US FDA and to the European Medicine Agency or EMA. For AMG509, a steep one targeting bispecific now named Xaluridomig, we have determined target doses and open monotherapy expansion cohorts in patients with advanced prostate cancer. We look forward to sharing initial data in the second half of 2023. To add to our growing biosimilars portfolio, we are pleased to announce that the European Commission granted marketing authorization for Bickemv are biosimilar to Saliris. Bickemv is the first biosimilar to Saliris approved by the EC and is approved only for and children with paroxysmal nocturnal

hemorrhage or

PNH, life threatening bone marrow disorder. We have also submitted the US Biologic License application to the FDA for this product. Additionally, phase three switching study to support an interchangeability designation in the US using an investigational high concentration formulation of Amgivita met its primary endpoint of similarity for the primary pharmacokinetics endpoints. In conclusion, I would like to thank AMG and staff around the world for the relentless focus on execution as we work hard to meet the needs of the patients we serve. I'll now turn things over to Peter.

Thank you, Dave. We're pleased with our execution and remain on track to deliver against our full year longer term objectives driven again by strong 14% volume growth across a number of products including Rapatha, Aventiti, Glensido, Tespire and Tamiyos. While we advance our late stage pipeline and work to complete the acquisition of Horizon by the end of June, we continue to invest for long term growth. I'll review our first quarter results before discussing our 2023 guidance. As a reminder, these results and outlook reflect AMGEN on a standalone basis without any adjustments for the announced Horizon acquisition. Turning to our first quarter financial results which are shown on slide 38 of the slide deck, total revenue at $6.1 billion declined 2% year over year. However, excluding the 2% negative impact of foreign currency exchange rates, product sales increased 4% and total revenues were unchanged versus the first quarter of 2022. The 4% point difference was due to an expected decrease in other revenue due to lower profit and cost sharing from our COVID-19 collaboration with Lilly. First quarter product sales are seasonally the lowest quarter as a percentage of the full year due to benefit plan changes, insurance re-verifications and increased copay expenses. In our first quarter, product sales increased 2% year over year driven by 14% volume growth, partially offset by 5% lower net selling price, 3% unfavorable changes to estimated sales deduction, 2% lower inventory levels and the 2% impact of FX rates previously mentioned. First quarter total non-GAF operating expenses increased 6% year over year driven by investments in research and development. Non-GAF R&D spend in the quarter increased 12% year over year with higher spending and later stage program support, discovery research and early pipeline and marketed product support. Non-GAF cost of sales as a percent of product sales increased 0.8 percentage points on a year over year basis to .4% primarily due to changes in product mix and higher profit share expense. Now recall that cost of sales in the first quarter was impacted by a portion of the $125 million of Puerto Rico excise tax, the print that was previously capitalized to inventory with the residual impact expected in the second quarter. Non-GAF SG&A expenses in the first quarter increased 1% year over year. We continue to focus on prioritizing key investments, digitalization and driving productivity. Non-GAF OINE benefited from higher interest income and approximately $110 million of gains from deleveraging related to the repurchase of a portion of our debt portfolio. Also recall we now mark to market our investment in Beijing with the impact included on our GAF income statement. In the first quarter this resulted in a GAF only pre-tax gain of about $1.9 billion. As expected our first quarter non-GAF tax rate increased 3.7 percentage points to .8% primarily due to the 2022 Puerto Rico tax law change that replaced the excise tax with an income tax beginning in 2023 as well as increased interest expense on our existing tax reserves. We are committed to our capital allocation priorities. First, we continue our investments in internal and external innovation that drive our long-term growth. Our increased spending and non-GAF R&D of 12% in Q123 over Q122 coupled with our acquisition of Tavneos and our announced acquisition of Horizon Therapeutics will further broaden and strengthen our portfolio of first in class, invest in class therapeutics to deliver to more patients globally. Second, we continue investing in our business to further long-term growth. Capital expenditures are at near peak levels driven by simultaneous construction of our state of the art manufacturing facilities in Ohio and North Carolina. We expect our annual capital expenditures to decline starting in 2024 with the completion and licensing of our Ohio plant. And third, we continue to return capital to our shareholders as we pay dividends of $2.13 per share in the first quarter. This represented a 10% increase over that paid in each of 2022's four quarters. Free cash flow for the quarter was driven lower by the timing of sales, rebates, and incentives, lower operating income, and higher capital expenditures from the building out of the state of the art facilities in North Carolina and Ohio. We expect strong cash flow for the remainder of the year consistent with our full year 2023 financial outlook that includes a non-GAAP operating margin of roughly 50%. We expect sequential growth in our free cash flow in the second quarter, although there may be an impact to Q2 and free cash flow from the expected closing of the Horizon acquisition due to the accounting treatment of certain items that were all expected in our Horizon acquisition financing and estimated deal costs, as well as our previously announced restructuring in the first quarter. Turning to the outlook for the business for 2023 on slide 40. Our guidance is currently provided on the Amgen standalone business and does not include any Horizon projections. We are raising our 2023 guidance. We're raising our 2023 revenue guidance to $26.2 to $27.3 billion versus previous guidance of $26.0 to $27.2 billion. This reflects our confidence in the underlying business and the improving overall market conditions for our patients to access our medicines that Bob and Murdo mentioned. We are also raising our 2023 non-GAAP EPS guidance to $17.60 to $18.70 versus previous guidance at $17.40 to $18.60 per share. Let me mention a few more important considerations as you model the remainder of 2023. For product sales, we project solid volume growth at a portfolio level and consistent with the first quarter. We expect a -single-digit price decline for our portfolio in 2023. We now project full-year Nulasta sales of approximately $700 million and full-year combined CanGente and Envase sales of approximately $850 million. We anticipate full-year non-GAAP operating expenses to increase by about 1% over last year. We expect the 2023 operating margin as a percent of product sales to be roughly 50% and expect our second quarter operating margin to also be roughly 50%. And we also expect cost of sales as a percentage of product sales to be between 16 and 17%, non-GAAP R&D expenses in 2023 to remain unchanged and estimated to increase 3 to 4% year over year. Non-GAAP SG&A spend is a percentage of product sales to slightly decrease year over year driven by our ongoing digitalization, continuous improvement and productivity imperatives. We anticipate non-GAAP OINE to be in the range of $1.2 to $1.3 billion, reflecting the first quarter deleveraging related to the debt repurchases I mentioned, with the remainder of the year's OINE expense to be evenly split over the remaining three quarters. We expect a non-GAAP tax rate of 18 to 19%. We plan to continue to meaningfully increase our dividend. We continue to expect share repurchases not to exceed $500 million in 2023. Our capital expenditure guidance remains unchanged at approximately $925 million in 2023. Our confidence is strong in the long-term outlook for Amgen and our long-term growth. We look forward to completing the announced acquisition of Horizon. We expect to provide updated guidance as appropriate after the transaction closes. Many thanks as always to our 24,000 plus dedicated colleagues all over the world, executing each day on behalf of our patients and our future patients. That concludes the financial update. I'll turn it over to Bob for Q&A.

Okay, thank you, Peter. All right, Julianne, if you could remind our callers of the process for asking a question. I know they've had a long day already, so ask them to hold their questions to one each and do our best to get to everybody who has one for us.

Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 1. Again, to ask a question, please press star 1. Our first question comes from Salvin Richter from Goldman Sachs. Please go ahead. Your line is open.

Good afternoon. Thanks for taking my question. For TESPAI, you've highlighted the broad clinical program and given the Phase II datasets we're expecting this year and next year, could you just comment on the indications where you have the most confidence in? Thank you.

Who are you? Yeah, thanks, Salvin. All of the indications that we're pursuing have some mechanistic basis. Chronic spontaneous urticaria is an eosinophil-driven disease in part, as is eosinophilic esophagitis and given the mechanism of TSLP inhibition that underlay the thinking behind pursuing those indications. As I mentioned briefly in COPD as another example, there is accumulating evidence that triggers such as viral infections, smoke, particles from pollutants can trigger TSLP release from bronchoepithelium. These are consistent with data showing that in patients with COPD, TSLP levels are elevated in sputum, bronchoalveolar lavage fluid, and bronchial mucosa. And so, as I mentioned, that trial is fully enrolled. We expect a data readout given the duration of therapy that one wants to see in these patients in the first half of next year. So I think there's good mechanistic basis. We're in clinical trial execution mode now and really waiting data readouts.

Thank you, Salveen. Our next question comes from Michael Yee from Jeffreys. Please go ahead. Your line is open.

Thank you. Following on the pipeline, maybe for David, you know, I think what's interesting is that you obviously had -133-OBC data and now you are emphasizing AMG-786 and I think it's enrolling and treating people now. Can you just talk a little bit about why you'd be excited about that? Is that synergistic? Is there an angle with that to be excited about given all of the things going on in obesity? Thank you.

Yeah, I think what you said at the end there is very important, Mike, in terms of everything that's going on in obesity. If we just step back for a second and think about what the magnitude of the problem is here, you know, there are hundreds of millions of patients now globally. We are doing an experiment in the 21st century that the world has never done by creating an obesity crisis. Now, we call obesity a single disease, but it is clearly a complex heterogeneous disorder. There are undoubtedly patient subsets buried within that and different patients may well benefit from different therapies. This is a disorder that's rooted in human evolution and now is a function of our environment. And so our development program for both 133 and for the molecules that will follow behind really intends to capitalize on the fact that there's a very large volume of patients. It's a heterogeneous disorder. I think this is a field that is in its infancy and we have a chance to help define what those are and who will benefit from specific therapies using, for example, our industry-leading database of multiomic profiling, which we intend to employ aggressively in these development programs. You mentioned AMG 786, and I'll just conclude with a comment on that. That is a -incretin-based mechanism of action, and I think that is also an area that will be very fertile for drug development and it's a focus of us pre-clinically as well right now. So thanks for the question. It's early days, but we think that this is one of the big public health challenges of the current century.

Thank you, Michael. Our next question comes from Umar Rafet from Evercore ISI. Please go ahead. Your line is open.

Hi, guys. Thanks for taking my question. I'm a little confused today about some of the numbers I'm looking at. So, for example, I mean, you know well, Abvishumar was a very important patient. You guys are the ones that launched it, and Abvi reported they're down 26% year over year. So I guess what I don't understand is how come Emreel is down 33% year over year, more so than the company that did go by similar. And I think some of that speaks to a little bit the inventory issues that are happening. And they seem quite significant the more I think about the magnitude reported. For example, 21% drop on Emreel and 28% drop on O'Tezla, which almost sounds like three weeks worth of work down. I usually think of total inventory in the channel being about three weeks. So we'd love to get any clarity there. Thank you.

Yeah, thanks, Umar. You're on to some of the fact pattern. Let me just go through kind of the elements of Emreel specifically. First off, we were up 1% in volume in the quarter. So the leading indicators of Emreel volume performance all look quite good. And that's a function of strong demand for the product in the market, good quality execution. And an additional pharmacy benefit, a formulary win starting in January of the year. So we would expect continued low single digit volume growth throughout the course of 2023. So that's the kind of high quality leading indicators of the volume performance of the product. The inventory component is pretty substantial, as you highlight. It is a function of both wholesaler inventory levels being down as well as specialty pharmacy. And I think it's partly a function of the fact that we did have volume increase and there was also a pretty significant work down through the quarter. We would expect those inventory levels to return to normal inventory levels throughout the course of the year. And then the last piece of Emreel is an out of period adjustment, an unfavorable adjustment of about 9% related to prior period. And that's a function of things like state Medicaid true ups coming in as well as some other price adjustments from prior period. So overall, again, the leading indicators for Emreel are good, low single digit volume anticipated for the year, a little bit of price concession to get that formulary win. But then the other two events in the quarter are likely to improve over the course of the year as well, being inventory and prior period adjustment.

And maybe Murdo, just to jump in quickly, that prior period adjustment, I mean, that's an estimated sales deduction adjustment. Thank you, Peter. Yeah. So just to clarify that, and as Murdo said, we're looking for a slowing year over year price erosion on that too. So we think we've got some trends in our favor here.

Yeah. There is a big piece of that prior period that's also PHS and given the program that we're running for PHS patients, we expect that to be a lower impact throughout the course of the year as well.

Thank you, Umar. Our next question comes from Chris Raymond from Piper Sandler. Please go ahead. Your line is open.

Hey, thanks. I have a question on the biosimilar business. I'm not sure I heard this correctly or not, but from Murdo's comments, it sounds like AMGV to revenue might be fairly front loaded, given the inventory bill that I think you guys described. I know you guys don't give quarterly granularity, but maybe talk about the outlook for the rest of the year, especially given that you have a bunch of other launches, other biosimilar launches happening in that specific space. And then maybe just more strategically, just given the expectations have been kind of tempered here with AMGV, you guys still seem pretty committed to this business with Salira, Salia, Stellara launches. Just maybe talk about why these won't maybe see a similar tempering of expectations.

Thanks. Thanks for the question, Chris. On AMGV specifically, a lot of that Q1 revenue was what we would call buy-in from primarily IDNs. And so it's hard for us to see how much of that buy-in has been used up in actual prescription fill. So our conservative estimate is that the majority of that is buy-in and that Q2 could be lower than Q1 revenues based on that. So that's our estimate for AMGV. Obviously, we're very early in the launch year. We're building demand physician by physician and patient by patient. And some of that IDN pull-through is not visible to us because they don't share data necessarily with the IQVs of the world. So that's AMGV. But overall, we have been extremely successful in developing biosimilars at Amgen. We are very pleased with what we've been able to do so far by developing successful molecules that are either first or first wave launches. We continue to plan on being first or first wave in the biosimilar products that we're targeting. We have been able to continuously supply thanks to the hard work of our manufacturing and supply chain colleagues around the world. When we approach both institutional customers, payers, and providers, I think there's a lot of trust in the Amgen brand when it comes to the biosimilars that we manufacture. Certainly, last but not least, we do feel strongly that we will continue to be able to deliver on our 2X 21 sales by the end of the decade in our biosimilars business, so more than double our 2021 revenues. And we think we'll do that by continuing to launch both pharmacy benefit and medical benefit biosimilars, but the majority of that growth is going to be driven by medical benefit biosimilars. So still a very important part of our business and the people that work on it continue to deliver value to the healthcare system as we move forward.

The only thing I'd add to that, Chris, is that we're running this business very efficiently and we think when we look at the cash that we're generating on this business, we're earning an attractive return for our shareholders. So again, in order for us to continue to succeed in biosimilars, we need to execute effectively. And as you can see in the quarter with the Chem V progress and with the launch of Amge We continue to do what we plan to do in biosimilars. And again, I would reiterate, we think we're earning an attractive return for our shareholders in those commitments.

Thank you, Chris. Our next question comes from Mohit Bansal from Wells Fargo. Please go ahead. Your line is open.

Great. Thank you very much for taking my question. And my question is also related to biosimilar. Given that the demand so far doesn't look to be ticking up for Himara and your comments about next quarter do not also suggest that it may be a slow launch here, do you think this would mean that you are losing the first more advantage here or is there a way next year it could be more, Amge Vita could be more on a preferred side of formally rather than parity because it seems like parity is not cutting it just yet.

Yeah, thanks for the question, Mohit. I think we've definitely taken advantage of the first mover, particularly with the IDN channel. That's really where a lot of the initial uptake will be. I think we're also differentiated versus the other biosimilar manufacturers that have biosimilars to Himara in that we do cover the customer base here quite effectively, both in rheumatology and gastroenterology, having deployed medical and sales teams that are out there right now building awareness and demand for Amge Vita. Lastly, I would say that given that we've got parity access across the large three PBMs, we are in very good position to be able to pull through a lot of that Amge Vita. I think we were clear in saying this would be a gradual uptake for this product and we that we still have been able to use the time that we have ahead of a competition wisely to build that demand.

Thank you, Mohit. Our next question comes from Jay Olson from Oppenheimer. Please go ahead. Your line is open.

Oh, hey, thanks for taking the question. Curious about Tesla and how you expect the pricing dynamics to evolve over the course of the year, especially in the context of TicTube being mostly three drugs right now. I do expect the pricing for Otesla to evolve following the transition to TicTube to paid customers. Thank you.

Yeah, thank you, Jay. I think what we're pleased with is the broad access coverage we have on Otesla. We have very good coverage. We did actually add additional coverage at the beginning of the year with United Optum Part D plan coming online. There's a little bit of price concession to do that in the year. But beyond that, we've got good stable access for 2023 and we look forward to being able to maintain that in 2024. I don't see more decrement in price. In fact, we think price will, the negative price effects you saw in Q1 should abate a little bit in Q2 and beyond. So overall, very stable. The one thing that you mentioned that's interesting is the free goods program that competitors have out there. I do think that that's a little bit of a disruption in the market right now that's probably causing a bit of softness in our new patient demand. We get about 80% of our new patient growth coming from systemic, naive, topical patients receiving Otesla as their first systemic agent. I think when you have free good programs in the market, sometimes that free goods is a very easy way for a prescriber to try a novel agent. And I think that that's taking away some of that new patient growth that we're used to seeing. I do think that that will be different once those competitors contract for their market access and that's likely to be a 24 impact.

Thank you, Jay. Our next question comes from Colin Bristow from UBS. Please go ahead. Your line is open.

Hey, good afternoon and congrats on the quarter. So one for Murdo, we've now got the chronic TEPESA data. I just wanted to, could you give us your thoughts on this and does this in any way change your view on the size of the commercial opportunity? And then a quick sort of housekeeping one on LumaCraft. How much of the weakness this quarter was sort of net pricing versus competition from Morati? Thank you.

Thanks, Colin. Maybe I could take a minute just on TEPESA because there are quite a few analysts on the call that would be unfamiliar with how the patient journey for thyroid eye disease actually works and it's important because it has a bearing on the demand pattern for TEPESA. The way in which the Horizon team actually track the performance is they look at something called patient enrollment forms, which is the initial request, if you will, to start a thyroid eye disease patient on TEPESA. It then takes quite a while for that patient enrollment form to move its way through the prior authorization process against medical policies that payers have in place. That can take up to 90 days. Then you need to schedule that patient's first infusion. And in thyroid eye disease, it's not like an oncology where there's a clinical oncologist relatively evenly distributed throughout the country that can do infused drug administration. This is a lot more concentrated. And so it takes a while for the patient to be referred to the right site of care to receive their first infusion of TEPESA. So that also adds time. So while tracking the early leading indicator that we look at, which is patient enrollment form, there's quite a lag between that patient enrollment form starting and when that first infusion will occur. And that's really important to keep in mind when you see either flat or in this case, I think, strengthening demand for TEPESA patient enrollment forms. That will take a while to flow through into net sales. So that would be my my prefacing comment. Now, besides that, I think we're really excited, as Dave said, about the chronic data that were recently announced. And my congratulations to the entire Horizon team for executing a high quality trial and and showing how TEPESA can benefit a broader cross-section of patients with lower clinical activity score and truly highlighting the need for chronic care in this category. So I think that's a fantastic accomplishment. I think the simultaneous label change is just a nod to the conviction that even the regulator has about the utility of this product and this disease. And then I think the Horizon team has spent a lot of time over the last few months expanding their commercial capabilities and their medical capabilities. And they're in really good shape to take this this this great new data, which is on label to providers and to payers and to help expand the use of that product in the U.S. So we're we're quite optimistic about the future growth of TEPESA. And then, of course, you know, from our side, we're also excited about being able to launch TEPESA in other markets around the world. Once we close this transaction, we have the. The capabilities and the structure and the scale, given that we've been expanding Amgen's footprint globally over the last several years. And so we're ready to go and we'll work closely with Horizon to do that so that TEPESA has multiple opportunities to grow over time. And on Lumicrad's just real quick, we did see a little bit of increased inventory in the fourth quarter of last year. So the year on year compare or quarter on quarter compare, I should say, is really more about that inventory coming through. The actual demand is pretty flat from Q4 to Q1. And so we've been able to hold on quite quite nicely despite competitors in the market.

Thank you, Colin. Our next question comes from your own Werber from TD Cowan. Please go ahead. Your line is open.

Hi, guys, this is Brendan for your own. Thanks very much for taking the question. Just another quick one. Follow up on TESPAIR, maybe specifically in CSU. Can you give us a little bit of a sense of where you maybe see the bar for this midyear readout here? Our understanding is that the Mastheads are really one of the key players in CSU. And if TSLP is maybe a bit of a broader target, how do you see its impact on the disease course? Just trying to kind of understand relative positioning here and maybe gauge expectations for the phase two data. Thanks very much.

Yeah, thanks. You know, look, the trials fully enrolled, we're bringing in data. You know, I think within a few months we're going to have the data set in hand. You know, I think I've outlined mechanistically why TSLP being upstream could be one of the triggers that if inhibited could serve as a therapy for the disease. You know, at this point, you know, I think it's really just getting the data set.

Thank you, Yaron. Our next question comes from Evan Seigerman from BMO Capital Markets. Please go ahead. Your line is open.

Hi, guys. Thank you so much for taking my questions. On Otesla, you know, we've noted over several quarters, you know, we know the demand kind of issues that are playing out. Anything you can do from a commercial perspective that could help accelerate growth even in light of the free drug programs we're seeing? Or do we really have to wait until that kind of papers off come next year to maybe see more growth from the brand? Thank you.

Yeah, thanks, Evan. We're obviously doing quite a bit in the market from a commercial perspective. We we've actually increased the breadth of our promotion to include much more primary care targets, given that the milder patient who's on topical therapy today, that one point five million patient pool is a large addressable pool of patients are currently under the care of primary care physicians and tend not to be referred as frequently to dermatologists as the moderate to severe patients. So we've increased our primary care footprint and we're actually seeing growth in our primary care targets where we're seeing a little bit of pressure, a little bit of quarter on quarter pressure is in the in the higher end dermatology practices that treat more complex patients. And that's kind of where you would expect to see some of the novel agents being tried. So I do think that will stabilize over time, but that's going to take most of the year to take place. We'll continue to expand our primary care presence. And we're also working to expand our direct to consumer efforts to a mild to moderate patient population that might be on a topical, but still seeing unresolved symptoms due to their psoriasis, whether it be hands, face, scalp or other areas where the patient really wants to resolve those symptoms. So overall, there's quite a bit that we're putting into the market to increase our growth in that bio naive or systemic, naive, milder patient. And we would expect that that will strengthen our new patient capture over the course of the year. And we expect to see good growth for Otesla for many years to come.

Thank you, Evan. Our next question comes from Robin Karnoskas from Truist Securities. Please go ahead. Your line is open.

Thanks for taking your question. This is Nicole on Robin. Can you help us think through the new last franchise and how AMG and Planned Bound maintaining share given that there's a competitor or there are competitors with vice-leaders with auto injector devices and other devices in the market? How much pressure should we see going forward? How should we think about the new last franchise?

Thank you, Nicole, for the question. We're really pleased with what we've been able to do with the new last franchise to date. We've been able to defend our volume successfully. Obviously, we've had to concede some price to do that. And the volume on the prefilled syringe site has been under some pressure. I'm very pleased with what we've done with the new last on pro device. And we've held on to substantial share there. We think we've established good contractual commitments for this year. And we'll continue to battle with competitors if they come to market with a different device than is currently available. But we expect some continued pricing pressure there, as we've indicated. And overall, I think the team that's working on the last has done very well.

Thank you, Nicole. Our next question comes from Gregory Renza from RBC Capital Markets. Please go ahead. Your line is open.

Hey, guys, congrats on the quarter and thanks for taking my question. At the top of the call, you spoke about your R&D and identified, I think it was four medicines that you described as quintessentially Amgen. And my question is for you and the team, as you look across your portfolio, but also externally in other areas, are there specific areas of opportunity that you think could benefit from from the Amgen capabilities that perhaps are not represented or underrepresented in your portfolio today? Thanks so much.

Yeah, Dave and I can tackle that together. I think we've been very clear about what we look for in the outside, which are molecules that fit in our areas of strategic interest or where we think we have strength. And in particular, we're looking for opportunities in inflammation and oncology and in general medicine. And we look for medicines that could be first in class, best in class and have a big effect size in the patient populations that again, where we think we can add value. So we're constantly looking. I don't think we feel like we're particularly exposed or that we need to emphasize business development in any one of those three particular areas. But we're always looking for attractive opportunities early and late. Dave? Yeah, and

I would add the other component is technology platforms. Bob mentioned briefly in his opening remarks on the use of artificial intelligence and machine learning. I think we've quietly become a leader in this area. We are using artificial intelligence and machine learning across the R&D spectrum now from molecular engineering, where we've been extraordinarily pleased with the effect of dry labs or in silico design on the engineering of new protein molecules in time frames that are much, much shorter than were previously achievable with a higher success rate. Success here being defined as a candidate going forward that has the molecular attributes that you want. We are using it extensively in the clinical trials arena for site selection, for example, and other aspects of trial design. So this is something that I'll talk about more as we go through the course of the year. But these sorts of technology platforms lead us to what I think is an absolute hinge moment in this industry where the union of tech and biotech will move us forward to a qualitatively different time in drug discovery and drug development. And I think we're going to be very well positioned to take advantage of this union.

Thank you, Gregory. Our next question comes from Tim Anderson from Wolf Research. Please go ahead. Your line is open.

Thank you very much. On our Tesla, I'm wondering if you have any market share or performance metrics in the mild psoriasis segment specifically, where you've had approval for coming up on a year and a half. I'm guessing you have some idea of the penetration you're making in that very different segment.

Yeah, Tim, thanks for the question. Unfortunately, the differentiation between mild and moderate is difficult because there isn't really good coding that we can use as a surrogate for determining which is which. So what we look at is what percentage of our business is being sourced from systemic, naive patients, which we infer that they are milder and that their last treatment that they've been on prior to O-Tesla was a topical. And 80 percent of our new patient growth right now is coming from the post-topical pre-systemic patient type. So we are definitely making progress. What we're doing right now, as I mentioned earlier, is we're scaling our promotional effort that targets where these patients are being treated. And we expect to be able to grow the volume of patients that we're securing. You know, as you'll note, we grew the volume of O-Tesla in the quarter by five percent, and we expect to be able to improve on that.

Hey, Julian, I know we're already at half past the hour, so that's the time that we had asked our colleagues to set aside for the call. But we have a couple more questions in the queue. We'll try to get through those and then, as is our custom, be available if anybody has any questions for later this evening. But let's go to the next question.

Certainly. Thank you, Tim. Our next question comes from Jeff Meacham from Bank of America. Please go ahead. Your line is open.

Great afternoon, guys. Thanks for the question. Murdo, of your new launch products in the past few years, you know, Vinity stands out as one that had a really good progression each quarter. What's the long term opportunity here look like? And how do you think about lifecycle management of the Bone franchise overall later on as you get closer to the LOD? Thank you.

Yeah, thanks, Jeff, for the question and for noting the performance of Vinity. The Bone team have done an exceptional job with this product. And I think, you know, the Amgen legacy in building the Prolia franchise is clearly helping that along with our partnership with UCB. I was just recently in Japan. And, you know, as Bob mentioned in his opening remarks, we have an ultra aging society there and if Vinity is doing extremely well and I would say is a really good leading indicator of what we could do in the U.S. with that product. So I think we're we're really early in our ability to penetrate the millions of patients that would benefit from a bone builder like of Vinity. We also see a very nice continuum of care for these patients where, let's say you're on a bisphosphonate or Prolia and you have a fracture, you go on a Vinity for 12 months and then you return to a product like the NOSMA or Prolia for your continued care. So there really is a nice franchise opportunity here with both Prolia and Vinity. And we see the addressable population is being extremely large and we're still very early in growing that product. Obviously now annualizing it over a billion dollars, it's an exciting growth opportunity for us going forward and we're as enthusiastic as we possibly could be.

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

Certainly. Our next question comes from Dane Leone from Raymond James. Please go ahead. Your line is open.

Thank you. As we contemplate the updated guidance for the year, probably two competitive questions are still curious to me on the call. Firstly, you've had great momentum with Repatha. Earlier in the week, Novartis really highlighted Lepio or Enclisaren, finally gaining some traction in the US. I'd love to hear your thoughts around how you view competitive dynamics in the PCSK9 class for the remainder of the year. And then secondly, on a similar note, I did notice LumaCross declined Q on Q in the first quarter in the US. And we're just curious if you saw any impact of Crisati, the competitive agent from Maradi. Thank you.

Yeah, thanks. Maybe I'll flip the answer around. It's really too early to tell with Maradi impact. I think what I mentioned in response to an earlier question, the actual demand volume Q on Q is pretty flat. What we're actually seeing in the sales is a work down of some inventory, end user inventory from Q4 to Q1 of this year for LumaCross, but actual patients treated pretty flat quarter on quarter. So we're not seeing a big impact yet from Maradi. And of course, for LumaCross, we're really focused on growing LumaCross through additional indications and additional data to move into earlier lines of therapy, which Dave covered in his remarks. As we look at Repatha, I think we really are excited about what we're seeing now. We see more and more enthusiasm from cardiologists in a broad way and in a deep way, i.e. using Repatha more frequently in their prescribing practices for ASCBD patients. What we've been doing over the course of the last, let's call it 18 months, is increasing our Repatha commercial presence at primary care. And this year, we're actually making another step change in primary care promotional effort by increasing the size of our primary care sales force here. So Repatha is very much moving in the right direction. Patients are benefiting from it. We maintain more than a 70% share of the PCSK9 class, but quite frankly, that's not what my team looks at. They look at trying to penetrate the millions of ASCBD patients, the tens of millions of ASCBD patients that need to lower their LDLC to below goal. And as I mentioned in my opening remarks, less than 30% of patients, and that's not our data, that's data from the Family Heart organization, less than 30% of patients are at their LDLC goal. So we feel like this is important work. We feel like we've got best in class medicine in Repatha. We've got great coverage, and we expect to continue to grow this product globally to serve many millions of patients over the years to come.

Okay. Thank you, Murdo, for your response to the question. And let me again thank all of you for joining us on the call. Just a couple of quick thoughts. Obviously, we're off to a good start here in the year, as you can see from the results in the first quarter. And as I said in my opening remarks, far more important than the quarter itself is the way it's setting us up for the long term. So if you think back to the things that we've talked about as being important for us being able to deliver on our long-term growth strategy, it starts with our growth products having to perform. As you saw in the quarter, we had 10 brands achieving record performance. And performance means growing share, growing penetration. And as Murdo said, that's what we see happening now with our important growth-thriving brands. The other thing we said is that for us to be successful over the long term, we've got to perform in the international markets. And again, I think the volume trends that you see here early in the year are really good indicator that we're building the kinds of platforms we need to have in order to deliver long-term growth for our medicines outside of the United States. We talked a lot about biosimilars on this call. We've said that that we think is an important contributor to our growth long-term as we bring new products to market and launch them in new countries. And in order for us to do that, we need to be a leading competitor. And that means we need to execute on time and be in the first wave of launches. Once again, this quarter, you see further proof points of our being able to do that consistently with the launch of Amjavita, the approval of McKimvey, et cetera. So we think competitively we're well positioned there in a biosimilar business to capitalize on the opportunities. And then of course, pipeline is always critical and we're excited about how our pipeline is very rapidly advancing, particularly on the registration enabling trials, whether you look at Tarlatumab or Bima or Rokatinlamab. We have a lot of important registration enabling work underway and we're excited to start generating results from those portfolios, that portfolio products, as well as some of the products that are now attracting quite a bit of attention, like 133 in our mid-stage pipeline. So all in all, we're off to a good start in the quarter and we remain very enthusiastic about the long-term. And in the meanwhile, we're looking forward to having an opportunity to close on the horizon transaction once regulators have completed their work. So thank you for tuning in and we'll look forward to being back with all of you in August.

Great. Thanks everybody. And we'll be around for a while, so feel free to reach out to me if you have any questions. Thanks again.

This concludes our first quarter full year 2023 financial results conference call. You may now disconnect.

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