Great. Good morning, everybody. Thanks for joining us. I'm Terence Flynn, the US Biopharm analyst here at Morgan Stanley. We're very pleased to be hosting Amgen. Today from the company, we have Bob Bradway, who is the company's Chairman and CEO. Before we get started, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Bob, before you launch into my questions, I'll turn it over to you for some opening remarks, but thanks so much for your time today.
Great. Thank you, Terence. Thanks for having us, and thank you all for joining us. Perhaps before we get started, I might just say a word or two about Horizon. I know Terence probably won't be in position to ask questions about that. So let me just briefly update you on where we are, which is that we're excited now to have a path forward to close, and we expect to close shortly after the Irish sanction hearings, which should mean no later than the middle of October, we'll be closing the transaction. And it's not a transaction that the biopharma analysts that cover us, or it's not a company, rather, that they're all that familiar with. So let me just say a few words about why we felt Horizon was such a great strategic fit for us.
First, our strategy in research and development and the way we like to allocate capital for innovation is to focus on medicines that are innovative, first in class, make a really big difference to the patients who benefit from them, and address serious diseases. And that's exactly what Horizon's recently launched molecules do. They're novel, first in class, make a very big difference for the patients suffering from the diseases that the molecules were developed to treat. And again, the molecules treat very serious diseases. So a really good overlap in terms of the strategy, the high level, why we thought these were attractive opportunities or this was an attractive company with attractive opportunities for us.
In addition, the molecules that are at an early stage of their life cycle and molecules that we think still have tremendous growth potential are biologics, and we're a world leader in biologics, as you know, and so we're excited about the things that we think we can do through time with the Horizon portfolio in process development, new formulation development, other forms of life cycle management. So we see molecules that are still at an early enough stage in their life cycle that we can influence them, and we can influence them not just with our sales and marketing capabilities, but also with our protein sciences. We've talked some time about our desire to globalize our biologics business. We're now operating in 102 countries around the world, and I think Horizon had 10 people outside of the United States.
So we have an opportunity to take their medicines globally, which we're excited about doing. They now have registration in a couple of international markets, for example, and our teams outside the U.S. are really excited to be having the opportunity to work with those beginning in the month of October. So it fits well with our international strategy as well. And then finally, I would say that, you know, it fits well with our recent commitment to rare diseases. We acquired TAVNEOS, as some of you may know, which is a molecule designed to treat patients that suffer from a rare form of vasculitis.
And we think the capabilities that Horizon has built for helping manage rare disease patient populations is world-class, and we look forward to doing everything we can to learn about that and to try to assimilate that in our business and to continue to look for other opportunities through time to allocate capital to medicines that, again, can make a big difference even if the number of patients afflicted with the disease is few in number. So we're excited about Horizon. We see a clear path forward and, again, expect that transaction to close by the middle of October. Beyond Horizon, or the autumn, anyway, will be an exciting time for us.
There'll be data on a number of our pipeline projects, and I want to just quickly highlight four from the oncology portfolio, because there'll be a fair amount of information in a short period of time on them. I want to start with tarlatamab, which is our bispecific T-cell engaging molecule, which addresses small cell lung cancer. Just picking up on a theme that I've already introduced, small cell lung cancer is a very serious disease. There have been very few innovative medicines that have proven safe and effective in that setting, and we think we have a medicine that looks very attractive.
We announced earlier in the year that the results that we've seen from our phase two data we think are very encouraging from both a safety and efficacy standpoint, much stronger even than what we saw in our phase one trial. So we're very rapidly advancing what we think will be a completely novel way of addressing the needs of small cell lung cancer patients. And one of the reasons we're particularly excited about this, not just because it's novel and, you know, the data looked very encouraging, but it builds on what we've been doing in the area of T-cell engagement now for a while. And in particular, it follows on the success that we're experiencing with BLINCYTO.
And so in many ways, we see BLINCYTO as being a model for what we can do with tarlatamab and other bispecific medicines. Let me just briefly summarize for you BLINCYTO. You probably have observed that the product is growing very rapidly at the moment, with high double-digit growth rates, reflecting the fact that it's now being used more and more at more and more early stages of the acute lymphoblastic leukemia disease. When, of course, we launched BLINCYTO, it was in late-stage refractory relapsed patients, just as we would expect to launch tarlatamab in third line small cell lung cancer. But we very rapidly have been able to move forward in the leukemia settings to earlier and earlier lines of therapy.
In fact, recently, helped generate data that shows we're able to more than double the overall survival versus standard of care for patients who have early stages of acute lymphoblastic leukemia. In particular, we achieved that with patients who were what we call minimal residual disease negative. In other words, these are patients where there was no molecular evidence of a presence of the leukemia cells, and those patients were randomized in one arm to receive BLINCYTO, and then the other to stay on standard of care. Again, the superior results were achieved by BLINCYTO, demonstrating that even when the cancer is not detectable, it has the potential to evade the assays and is, you know, still there and can return. That's where BLINCYTO has been so effective in eliminating the disease.
So, just as that shows great promise in starting in late stages and moving to early stages, we think we can, we will be seeking to repeat that with tarlatamab. So, while it will enter very likely in third-line disease, there are 65,000-70,000 patients a year in the world's major markets that have small cell lung cancer that we think would be addressable with a therapy like tarlatamab. So we're at the early stages of what should be a very exciting new opportunity for us. Then I would also mention that this is the first time a T-cell engaging therapy has been shown to work in solid tumors, and we hope to follow it very quickly with others.
And the one that's getting most attention, perhaps at the moment, is a prostate cancer medicine directed at an antigen known as STEAP-1, a medicine called xaluritamig. And again, we're very encouraged, as we have said a few times during the course of the year, by the data that we see for that molecule. We expect to be sharing some of that in the autumn, and so we'll be excited for you to be able to see that and begin to form your own point of view. Then in addition, there are two other cancer medicines from our portfolio that you'll be seeing information on. And that, of course, includes our Lumakras data, where we demonstrated successful clinical responses in combination with Vectibix chemotherapy and colorectal cancer, so that's very encouraging.
And then I also want to mention a novel approach to treating tumors which overexpress PRMT5 and are MTAP null, that we think that on the order of 10%-15% of all large tumors fit that profile. And demonstrated with a medicine that we've designed as part of our... You've heard us talk about the inducible proximity platform, but it's the idea that multispecific drugs, we think, can be very effective in addressing targets that have been challenging, like the PRMT5 expressing tumors. So we've demonstrated some data there that we're very encouraged by, and we'll be expecting that to become public as well in the autumn. So 4 different molecules that are moving quickly through the pipeline for which there'll be new information available to you shortly. So that'll be exciting.
There are other things, of course, other phase III programs like our FGFR2B program in gastric cancer, but I wanted to just highlight the ones where data are imminent. I'm sure, Terence, you may want to talk about some of the other pipeline molecules, but a lot of attention obviously is being focused on our obesity portfolio and on our cardiovascular portfolio, where again, we think we have differentiated and novel medicines addressing big, important opportunities. Then there's a lot going on in our inflammation pipeline as well, with our OX40 medicine rapidly advancing in phase III clinical development, TEZSPIRE, and a number of additional indications which are potentially very exciting. And of course, you know, KYPROLIS, which I've already touched on. So quite a lot going on in our portfolio at the moment.
The business is performing well. I think you saw that in the second quarter. We're, you know, excited about the outlook for the balance of the year. And, I would simply reiterate that when it comes to the long term, we feel very encouraged about our ability to deliver long-term growth for our shareholders. And as we said at the time of the announcement of Horizon, now all those many months ago, we expect that Horizon will be additive to that long-term growth picture that we've talked to you about. So sorry, Terence, I took a few moments there, but why don't we turn it over to you for questions?
Appreciate it, Bob. No, thanks for joining us. So I guess the, you know, one segue question is, you know, you talked a lot about the innovation and the investment that the company's making in oncology. Obviously, the IRA is, you know, somewhat of a hurdle to the industry. Other companies have talked about maybe pivoting away from oncology because of some of the disincentives that unfortunately it creates. So maybe just help us think about how you're positioning the company for a post-IRA world here to continue to innovate and bring, you know, new therapies to patients, especially in areas like cancer, but then what that means as you think about the incremental R&D dollar that the company's investing.
Yeah. So I think unfortunately, the Inflation Reduction Act, Terence, is not good news for patients, and it won't prove to be good news for innovation, particularly in the area of small molecule research and development in cancer. So, you know, I think it is an inescapable consequence of the legislation that capital will be reallocated away from small molecule cancer medicines over time. And that's unfortunate because we are, you know, on the threshold of some really important breakthroughs in cancer. But, you know, the nature of that legislation conspires to cut the number of years that are available to innovators to earn a return on the innovation. And, you know, without the benefit of a full patent life, it's gonna be very difficult for companies to earn an attractive return.
So I think particularly in small molecule cancer research, it's a challenge, Terence. I don't know that I would include, to the same extent, that I would include the large molecules. But you know, the future of cancer research is that you have to start in the late lines, relatively small patient populations, and it takes time to move into the earlier lines of therapy. And without the benefit of a full patent life for molecules, that's a challenging equation to make work. But you know, we'll adapt, and you know, the fact that there is price pressure in the U.S. is no surprise to us. We think, again, it's very unfortunate for patients that it comes in the form of price control by the U.S. government. You know, I don't think that's gonna wind up being very constructive.
I think there were better ways to have met the needs of patients than what this legislation represents. So all in all, I think it's, it's unfortunate, but, you know, we'll move on, and we'll adapt. And, you know, again, I think we live in a world where people are getting older and older, and as they get older, they're susceptible to more and more disease. And, it's our responsibility to innovate, come up with, you know, better ways to prevent those diseases from debilitating people the way they do today. So we still see there being huge demand for what we do. We still think, you know, we can innovate prosperously, but, but let's not lose sight of the fact that the Inflation Reduction Act is a fundamental change for the industry, for sure.
Yep. Okay, great. One other, you know, big picture question is, you and I talked a lot over probably the last decade or so. Amgen was one of the first biotech companies to really make a bigger push into the primary care biologic space with Prolia, which goes back a ways, and then Repatha, also, CGRP for migraines. Maybe just, and we talked about obesity, or you talked about obesity in your opening remarks. Again, another primary care-type market. So maybe just what have you learned from this experience, and how are you thinking about kind of commercial strategy for some of these newer future launches on the primary care biologic space, where obviously Amgen has a lot of expertise there, and maybe segue that into obesity and how you're thinking about that market creation?
Yeah, I think you're right that we were certainly early, if not the first, you know, one of the pioneers in bringing biotech to primary care. And obviously, Prolia has become a very successful drug globally. We're seeing that repeated now with Evenity, which is another one of our bone building drugs. We're very excited about the performance that we've seen from Evenity, and so I think it demonstrates that you know, physicians are now comfortable with the idea of using monoclonal antibodies in a primary care setting. And you know, some of that was required education of the prescribers as well as the patients and the payers.
But I think we've made a lot of progress in that regard, and I think the stage is set for, for future innovative medicines that harness the power of biologics for large patient populations like osteoporosis, where, you know, the number of patients at risk of fracture from, that, disease is measured in the tens of millions, and of course, cardiovascular disease, with many tens of millions. So I think we're beyond the point of wondering whether it's possible to take biologics to a large patient audience. I think it's very clear that we can. And, you know, you might ask, you know, what are the advantages? Why is that a particularly attractive pathway?
Well, you know, the beauty of biologics is they're very specific, and particularly when it comes to large patient populations, you know, touch wood, the opportunity to rely on specificity and avoid off-target side effects, which often are a problem for small molecules, has proved to be a strength. And I think the other thing with, you know, biologics is, again, you know, the data sets are pretty consistent, you know, and that's partly a function of the fact that they're, again, specific. You don't have the off-target liabilities that come along with small molecules. So it's a strategy that we think has served us well. We also have some small molecules that are performing very well, but clearly, biologics are and will remain an important part of our future.
Great. As we think about, you know, 113 for obesity, maybe just remind us-
One thirty-three.
Or 133, sorry. Remind me.
Repeat after me. 133.
133. My older daughter is going through algebra right now, so I should have gotten that correct. So 133 for obesity. Just as you think about the target profile, maybe help us think about what you're aiming for here, and when can we expect to see the next set of phase 2 data? And then again, you know, to kind of pivot back to the prior commentary around primary care biologics, how do you see this obesity market really developing when you have both injectables and orals?
Yeah, well, so Terence was asking about our product, AMG 133, which is very rapidly enrolling in a large phase 2 study, where we'll have an opportunity to ask lots of different questions about how it behaves in obese patients. So we'll be excited to see those data, and those data will be available and likely reported next year. But this is a molecule which has two different components. It's built on a biologic backbone, and that has the benefit of having it hang around in the body longer than, for example, an oral medicine would or, you know, something that was just a peptide would. And so that gives us what we think is a differentiated approach to dosing.
So we're very interested in the prospect of monthly dosing, as opposed to other therapies in obesity, which require weekly dosing. We saw in our early clinical studies very significant rapid weight loss. Again, it's probably not entirely appropriate to do cross-trial comparisons, but I think those who have recognized that the speed at which, and the magnitude at which our medicine achieved weight loss was very impressive compared to other agents in the field. And there's an interesting, you know, glimmer of a different profile when the medicine is stopped. So we were able to show some data of, you know, at the end of the study, end of the phase 1 study, where people came off the drug, and we didn't see an immediate rebound in weight.
So anyway, we think we have a molecule that is differentiated from those that are in front of us, in the either in the clinic or in the market. And we're very rapidly advancing that, as I said, in phase 2 studies, and look forward to starting what we would expect to be a wide range of phase 3 studies of that molecule as quickly as possible, and as quickly as justified by the phase 2 data. But you know, obesity is not gonna be a disorder at Amgen have a number of different therapies that are in progress, including an oral, which is in the clinic, and we have a number of other preclinical projects that we have alluded to.
But the only thing we've said about those for competitive reasons is that they're orthogonal to the medicines that are gaining so much attention in the marketplace now. So orthogonal to the incretin approach, which is what is behind the, you know, the first two molecules in the market. And then just the other thing to note about our AMG 132, based on our belief from analyzing human genetics, we chose to agonize the GIP receptor rather than what our competitors are doing, which is we're antagonizing and our competitors are agonizing it. So we'll see again, in the fullness of time, the data may speak to whether that was an important differentiation or not. But we're excited about that.
I know a number of you are also excited, be it at an early stage of development.
Great. And as you think about it, you obviously have a lot of internal efforts here on the, obesity front. Is this an area, as you think about business development, where you could potentially bolster capabilities, or you feel like you have everything you need internally to really compete at scale in this, building market?
Yeah, I think this is going to be a competitive marketplace, and I think we're going to have to invest at scale in order to do well in this marketplace. So, that's what we're focusing on. We're focusing on making sure we understand what it will mean to invest at scale for obesity program. And I say program, it's probably not just a single molecule. And you know, again, our growing belief, partly based on genetics, partly based on the clinical data that's emerging in the field, is that obesity is causal, not just associated with, but causal in a number of other important chronic diseases.
And so we're going to want to study AMG 133 in rigorous phase III studies to see whether we can prevent some of those diseases that we think are caused by the excess of adipose tissue, so the obesity. And so this is going to be an exciting opportunity for us. But, you know, Terence, it would obviously entail, you know, significant investment over time.
Yep. Okay, understood. Maybe we'll, we'll pivot to, you know, biosimilars and then segue to, to immunology. On, on biosimilars, just curious, maybe, you know, how this opportunity, has it evolved in the U.S., comparable to your expectations as you initially, you know, set out to, to move into this area? And then as we think about the implications for RA/immunology, how do you see this playing out over kind of the near to medium term here, as we now have biosimilars Humira, you have your own biosimilar Humira, we have a biosimilar Stelara coming in 2025, which obviously is going to shape some of these, these markets. I know you could talk about biosimilars as a, as an investment for Amgen, but then what does that mean for immunology and how you think about that, that from a commercial opportunity?
Well, as an investment, again, we continue to think it's an attractive way for us to earn a return for our investors. So we think that our internal rates of return on our biosimilar investments are exceeding by a very comfortable margin, our cost of capital. So we think we're creating value with our biosimilars. What I would say is, of course, that, you know, first, we're capitalizing on economies of scope, which, you know, which means we are leveraging the many decades of experience we have in biologics, and that's experience in process development of biologic molecules, manufacturing, clinical development, quality, safety, you know, and so forth. So we have the infrastructure in place, and we're leveraging that globally to earn what we think will prove to be attractive returns.
I would say, I think your question was focused particularly on the U.S. The market in the U.S. is segmenting into physician and clinic-administered medicines on the one hand, and then pharmacy medicines on the other. I would say that the physician and hospital-based similar market's evolving very much consistent with what we expected. And when you look at the five medicines that we will be launching between now and the end of the decade, obviously, the bulk of those are hospital, physician and hospital-based medicines. So we feel pretty confident about what the path looks like there. We're still in the early stages on the pharmacy side, pharmacy biosimilar side, where our AMGEVITA was the first medicine in the market. And that, you know, we'll see.
I think it's a little bit early to know for sure how that will evolve. I would also add that, you know, one of the unfortunate, likely unfortunate consequences of the Inflation Reduction Act is that it will disrupt both the biosimilar and probably the generic market in ways that are not, they're hard to predict right now. So I think we're all going to have to keep a close eye on how the implementation of the Inflation Reduction Act affects the market in the U.S. But globally, again, continues to be very attractive, and the fact that we have several more launches coming gives us comfort that this should be a source of attractive growth and therefore, capital return for our investors.
Okay. Maybe the immunology piece, as you think about, you know, implications for the immunology market broadly. Obviously, you know, you were one of the pioneers there with Enbrel in terms of building that RA and psoriasis market, continue to innovate with Otezla, an oral option. You said, you know, biosimilar AMGEVITA. So again, as we think about, you know, that market and the implications of these, you know, some of these legacy drugs going off patent, what does that mean in terms of how you think about, you know, scaling that business, investing in that business, and then?
Well, I would be careful not to broaden, you know, from what's happening in the TNF sequestering market to all of inflammation or immunology. So, inflammation remains a very attractive and important marketplace for us. You see that with the, you know, the great success that we're enjoying with TEZSPIRE in an early stage of its launch. And it's an area, again, where I think there's gonna be tremendous innovation, and there's still enormous unmet patient needs. So, you know, in our case, TEZSPIRE, TAVNEOS, two recently launched medicines that address autoimmune disorders. And then, of course, we've talked about the, in the horizon context, you know, TEPEZZA, Repatha, and KRYSTEXXA are also obviously immunology-based medicines designed for autoimmune disorders.
So I think there's no question that that remains a very attractive area and, you know, an area of ongoing investment for us and others in the field. Obviously, Otezla as well represents an attractive, ongoing, we believe, market for us, and there's still a lot of unmet need for patients generally in that area. But as regards to TNF sequestrants and the treatment of, you know, rheumatoid arthritis, and ankylosing spondylitis, and psoriatic arthritis, and psoriasis, you know, obviously, with patents expiring, the nature of that marketplace is changing, and I think it'll... Over time, it'll prove to be like other therapeutic market segments. There'll be some disruption, there'll be some new price points established. But, you know, what I would say about Enbrel is that it sets a pretty high safety and efficacy bar.
In order for innovative new medicines to replace Enbrel, they're gonna have to do something pretty special as relates either safety, efficacy, or, you know, some other form of clinical performance.
Okay, great. Maybe just one additional one on the commercial side is, you know, you mentioned good momentum here back half of the year. Just help us think about any other puts and takes, as you work through the balance of 2023. And then the other kind of related question is, you know, Amgen has had a very efficient operating margin structure for a while now. And so as we think about kind of the forward, do you feel like that's a sustainable level here, given some of the potential headwinds from IRA or, you know, other aspects of the business?
Well, you know, when you talk about operating margin and IRA, Terrence, obviously, the IRA doesn't really come into effect, you know, still for a couple of years. So, you know, I don't think you're asking me to give forward operating margin guidance this morning, but we've given a perspective for this year on our operating margin. So you shouldn't expect any significant changes in our operating margin. We take a lot of pride in trying to run the business efficiently. We take pride in having, you know, adapted our business to the reality of price, a price-decreasing environment. Price has been dropping in the U.S. since 2018, and we've been making the necessary changes in our business to stay ahead of that. We would expect to continue to do that.
But in terms of the second half of the year, again, the molecules that need to grow in order for us to achieve our long-term ambitions are growing very well. So Repatha, again, growing very well, Evenity growing very well. Prolia continues to perform very well. You know, we're excited about, you know, Tezspire and some of the newly launched molecules that I talked about. I referenced Blincyto earlier, performing very well, as is the rest of our oncology portfolio. So we feel good that the things that need to perform are on track to do that. In terms of headwinds, you know, obviously, there's still some, you know, some headwinds on the pricing side for biosimilars, but that's not different from what we had expected. And there's obviously a lot of free drugs still in the psoriasis market.
So, you know, we continue to think we're very well positioned with Otezla, with the benefit of its safety and efficacy record, and, and the fact that we have a label now that enables us to promote this to mild to moderate and, and effectively to all psoriasis patients. So we still see that as an attractive longer-term opportunity, but there's probably still headwinds in the second half of the year as we work through the ongoing free drug in the marketplace.
Okay, great. Maybe pivoting back to the pipeline, I guess, on tarlatamab, tarlatamab. Thanks for the overview here in small cell. Have you guys met with the FDA yet to understand if you're gonna be able to file on those data? I know there's significant unmet need in this-
Again, I would just encourage you to stay tuned. As I mentioned, Terence, we'll have an opportunity in the autumn to talk about that and a number of the other programs. So, we'll convene with investors as appropriate around those data and around those events.
Okay. And the other one, you mentioned, obviously, the success of TEZSPIRE commercially in the asthma setting. You're also looking to push into COPD. Dupixent had some positive phase 3 data in this indication. Is there any read-through to the TEZSPIRE program as you think about the likelihood of success here in COPD?
We're obviously very attracted to TEZSPIRE, which is a completely different mechanism of action from the other medicine that you referenced. And we, in particular, like the fact that ours is a medicine that looks like it has the potential to be effective in patients, irrespective of what their eosinophil level is, which is a biomarker of relevance for people who treat patients with autoimmune disorders like the respiratory diseases for which we're studying TEZSPIRE. So it has the potential to be a very broad therapy, but COPD remains a really important unmet medical need, and we need the data to tell us whether this will be an effective approach or not. But we're encouraged, we're running the trial, and we're hopeful.
Great. Well, I think we're up against time, Bob-
All right.
But really appreciate your time this morning.
Thank you, Terence. Appreciate it. Thank you all.
Thank you.