Amgen Earnings Call INSIGHTS: Second Half Investment Opportunities, Phase 3 Program

On Thursday, Amgen Inc (NASDAQ:AMGN) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Second Half Investment Opportunities

Marshall Urist – Morgan Stanley: Just a couple of financial questions on what looks like a strong quarter. Would you able just to quantify some of the benefits of the accounting changes on the anemia franchise that you mentioned that you call out in the press release would be helpful? I’m just trying to get a little bit better sense of the quarter. Then again I know you referenced it on the guidance raise, could you help us just to think through in terms of how much of the incremental profitability that you see in the second half of the year that you are going to reinvest in the business, where is that going to go as we think about the numbers for the second half of the year?

Robert A. Bradway – President and CEO: Sure, Marshall, maybe I can take the second piece of that question and then Jon can answer your specific question about the ESA reference. With respect to the second half, Marshall, remember in the first quarter we said, and on this call we’ve reiterated a couple things about the second half. First that we’re excited about the opportunity to be investing in the second half on couple of innovative important pipeline programs that are advancing to Phase 3, so that includes AMG 785 and you’ve heard our remarks now as well on AMG 145. In addition, bear in mind, when you think about the second half that Enbrel is performing very well this year, and as you know, the margins on Enbrel are different from some of our other products, and so that will be reflected when you look at the margins in the second half, but we continue to invest in Enbrel. We feel we’re earning an attractive return on that, and in addition, we’re pleased with the progress and the returns that we’re earning on the denosumab launched globally. So, we’re excited about the first half of the year. We like the investment opportunities that are available to us and we’re excited to see the momentum continue in the second half. Jon, do you want to address Marshall’s specific questions on the accounting?

Jonathan M. Peacock – EVP and CFO: Yes. Maybe I will just also just remind Marshall that with our $3 billion debt offering in May there will be a sort of effect on interest expense in the second half of the year from that. But again I just reiterate the comment that, we will continue to maintain the discipline of ensuring that operating expenses grow at/or below the level of revenue growth. On the question on EPOGEN in particular, I think we in the press release talked about the drivers of EPOGEN’s performance during the quarter. There was some adjustment to Medicaid rebates. It was – I think we mentioned three factors, customer buying patterns and low single-digit point growth and underlying demand but there were some Medicaid rebate adjustments. That is something we do periodically. It wasn’t the major factor for EPOGEN in the quarter but it was part of the overall performance. But dose utilization, the reduction in discounts from the new contracts, were the main factors and the accounting estimate change was probably the smaller of those three.

Phase 3 Program

Matthew Roden – UBS (US): On AMG 145, Sean I presume the initial Phase 3 investigation will be in special populations such as those studied in Phase 2, is that correct or do you view this as a broader base replacement for statins as lipid-lowering agent? Then related, can you talk about the end points under consideration for Phase 3, interested not only from a clinical perspective but also trying to understand the length of time before you might be able to file a BLA?

Sean E. Harper – EVP, Research and Development: So I appreciate the question and I think that the 145 program is one that is of course a very competitive space right now, and so we’re not wanting to provide just yet a lot of the detail around the Phase 3 program in terms of things such as endpoints and exact timing. I would answer your first question by saying that we really see the opportunity for this product being very squarely in the space of patients who despite all available therapies are not reaching their LDL cholesterol goals and therefore are walking around with markedly elevated cardiovascular risk. So, I think it’s hard to imagine why one would step away from in many cases a generic, very effective statin therapy if that were sort of treating a patient sufficiently, but as you probably know there are very large numbers of patients who were not getting to their goals despite the availability of such therapies.