Form 10-Q for AMGEN INC
This report and other documents we file with the U.S. Securities and Exchange Commission (SEC) contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume,” and “continue,” as well as variations of such words and similar expressions, are intended to identify such forward-looking statements. These statements are not guarantees of future performance, and they involve certain risks, uncertainties and assumptions that are difficult to predict. We describe our respective risks, uncertainties and assumptions that could affect the outcome or results of operations in Item 1A. Risk Factors in Part II herein. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements. Reference is made in particular to forward-looking statements regarding product sales, regulatory activities, clinical trial results, reimbursement, expenses, EPS, liquidity and capital resources, trends and planned dividends, stock repurchases and restructuring plans. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise. Overview
Amgen is committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics. This approach begins by using tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.
Amgen focuses on areas of high unmet medical need and leverages its biologics manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve people’s lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.
Currently, we market primarily recombinant protein therapeutics for supportive cancer care, inflammation, nephrology and bone health. Our principal products are Neulasta� (pegfilgrastim), NEUPOGEN� (filgrastim), Enbrel� (etanercept), XGEVA� (denosumab), Prolia� (denosumab), Sensipar�/Mimpara� (cinacalcet) and our erythropoiesis-stimulating agents: Aranesp� (darbepoetin alfa) and EPOGEN� (epoetin alfa). Our product sales outside the United States consist principally of sales in Europe. For the three months ended March 31, 2015, our principal products represented 91% of worldwide product sales. We market several other products, including Vectibix� (panitumumab), Nplate� (romiplostim), Kyprolis� (carfilzomib) and BLINCYTO� (blinatumomab).
Following is a summary of selected significant developments affecting our business that have occurred since December 31, 2014. For additional developments or for a more comprehensive discussion of certain developments discussed below, see our Annual Report on Form 10-K for the year ended December 31, 2014. Products/Pipeline
� In April 2015, we announced that the FDA granted approval of Corlanor� to reduce the risk of hospitalization for worsening heart failure in patients with stable, symptomatic chronic heart failure with left ventricular ejection fraction ?35 percent, who are in sinus rhythm with resting heart rate ?70 beats per minute and either are on maximally tolerated doses of beta blockers or have a contraindication to beta blocker use. Commercial sales launched in April 2015.
� In March 2015, we announced that we submitted an application seeking marketing approval of Repatha� for the treatment of high cholesterol to the Ministry of Health, Labour and Welfare in Japan.
� In February 2015, we announced results from the head-to-head phase 3 study comparing AMG 416 with cinacalcet for the treatment of secondary hyperparathyroidism in patients with chronic kidney disease receiving hemodialysis. The study met the primary endpoint of non-inferiority of AMG 416 compared to cinacalcet.
� In March 2015, we announced that the FDA accepted the supplemental New Drug Application of Kyprolis� for the treatment of patients with relapsed multiple myeloma who have received at least one prior therapy. As part of the acceptance, the FDA granted Kyprolis� priority review.
� In March 2015, we announced the results from a planned interim analysis showing that the phase 3 head-to-head clinical trial ENDEAVOR evaluating Kyprolis� in combination with low-dose dexamethasone versus Velcade� (bortezomib) and low-dose dexamethasone met the primary endpoint of progression-free survival (PFS). Patients with relapsed multiple myeloma treated with Kyprolis� lived approximately twice as long without their disease worsening, demonstrating statistically and clinically significant superiority over Velcade�.
� In April 2015, we announced the initiation of a phase 3 study with weekly dosing in relapsed and refractory multiple myeloma.
� In March 2015, we announced the Neulasta� Delivery Kit is now available in the United States. The Neulasta� Delivery Kit includes a specially designed single-use prefilled syringe co-packaged with the new On-body Injector for Neulasta�. The Neulasta� Delivery Kit enables the healthcare provider to initiate administration of Neulasta� on the same day as cytotoxic chemotherapy-with delivery of the patient’s full dose of Neulasta� the day following chemotherapy administration, consistent with the Neulasta� prescribing information. This frees patients from a return visit to their healthcare provider the day after chemotherapy.
� In February 2015, we announced that the CTGTAC and the ODAC of the FDA will jointly review our talimogene laherparepvec BLA at a meeting on April 29, 2015. These advisory committees review marketed and investigational human drug products, including safety and effectiveness data, and make recommendations to the FDA. The FDA will consider the advisory committees’ recommendations in its review of our talimogene laherparepvec BLA. The Prescription Drug User Fee Act action date for completion of FDA review of our talimogene laherparepvec BLA for the treatment of patients with injectable regionally or distantly metastatic melanoma is October 27, 2015.
* FDA provisionally approved trade name
� In April 2015, we announced that we stopped administration of blinded investigational product in the phase 3 study of trebananib in first-line ovarian cancer based on a recommendation by the Data Safety Monitoring Committee, who deemed the study unlikely to achieve its primary PFS endpoint.
� In April 2015, we announced that the European Commission approved a new use of Vectibix� as first-line treatment in combination with FOLFIRI for the treatment of adult patients with wild-type (WT) RAS metastatic colorectal cancer (mCRC). About half of the patients with mCRC have WT RAS tumors. FOLFIRI, an irinotecan-based chemotherapy regimen, is frequently used in first-line colorectal cancer treatment in Europe.
Selected financial information
The following is an overview of our results of operations (dollar amounts in millions, except per share data):
Three months ended March 31, 2015 2014 Change Product sales: U.S. $ 3,771 $ 3,289 15 % Rest of the world (ROW) 1,103 1,067 3 % Total product sales 4,874 4,356 12 % Other revenues 159 165 (4 )% Total revenues $ 5,033 $ 4,521 11 % Operating expenses $ 3,011 $ 3,157 (5 )% Operating income $ 2,022 $ 1,364 48 % Net income $ 1,623 $ 1,073 51 % Diluted EPS $ 2.11 $ 1.40 51 % Diluted shares 770 768 - %
The decrease in operating expenses for the three months ended March 31, 2015, was driven primarily as a result of savings from transformation and process improvement efforts under our restructuring plan, offset partially by increased investments for launching new products.
The increases in net income and diluted EPS for the three months ended March 31, 2015, were driven by an increase in operating income.
Results of operations
Worldwide product sales were as follows (dollar amounts in millions):
Three months ended March 31, 2015 2014 Change Neulasta�/NEUPOGEN� $ 1,380 $ 1,379 - % ENBREL 1,116 988 13 % XGEVA� 340 279 22 % Prolia� 272 196 39 % EPOGEN� 534 462 16 % Aranesp� 480 460 4 % Sensipar�/Mimpara� 334 270 24 % Other products 418 322 30 % Total product sales $ 4,874 $ 4,356 12 %
Total Neulasta�/NEUPOGEN� sales by geographic region were as follows (dollar amounts in millions):
Three months ended March 31, 2015 2014 Change Neulasta�- U.S. $ 922 $ 852 8 % Neulasta�- ROW 212 238 (11 )% Total Neulasta� 1,134 1,090 4 % NEUPOGEN�- U.S. 181 214 (15 )% NEUPOGEN�- ROW 65 75 (13 )% Total NEUPOGEN� 246 289 (15 )% Total Neulasta�/NEUPOGEN� $ 1,380 $ 1,379 - %
ENBREL Total ENBREL sales by geographic region were as follows (dollar amounts in millions): Three months ended March 31, 2015 2014 Change ENBREL - U.S. $ 1,052 $ 924 14 % ENBREL - Canada 64 64 - % Total ENBREL $ 1,116 $ 988 13 %
XGEVA� and Prolia�
Total XGEVA� and total Prolia� sales by geographic region were as follows (dollar amounts in millions):
Three months ended March 31, 2015 2014 Change XGEVA� - U.S. $ 245 $ 200 23 % XGEVA� - ROW 95 79 20 % Total XGEVA� 340 279 22 % Prolia� - U.S. 170 119 43 % Prolia� - ROW 102 77 32 % Total Prolia� 272 196 39 % Total XGEVA�/Prolia� $ 612 $ 475 29 %
Total EPOGEN� sales were as follows (dollar amounts in millions):
Our remaining material U.S. patent for EPOGEN� expires in May 2015. As a result, we may face competition in the United States, which may have a material adverse impact over time on EPOGEN� sales. In addition, EPOGEN� and Aranesp� compete with MIRCERA� in the United States. F. Hoffman-La Roche Ltd. (Roche) began selling MIRCERA� in October 2014 in the United States. MIRCERA� competes with Aranesp� in the nephrology segment only. On December 16, 2014, Hospira, Inc. submitted a BLA to the FDA for Retacrit�, a proposed biosimilar to EPOGEN�, under the abbreviated pathway.
Aranesp� Total Aranesp� sales by geographic region were as follows (dollar amounts in millions): Three months ended March 31, 2015 2014 Change Aranesp� - U.S. $ 189 $ 177 7 % Aranesp� - ROW 291 283 3 % Total Aranesp� $ 480 $ 460 4 %
Total Sensipar�/Mimpara� sales by geographic region were as follows (dollar amounts in millions):
Three months ended March 31, 2015 2014 Change Sensipar� - U.S. $ 241 $ 178 35 % Sensipar�/Mimpara� - ROW 93 92 1 % Total Sensipar�/Mimpara� $ 334 $ 270 24 %
Other product sales by geographic region were as follows (dollar amounts in millions):
Three months ended March 31, 2015 2014 Change Vectibix� - U.S. $ 47 $ 39 21 % Vectibix� - ROW 75 64 17 % Nplate� - U.S. 78 62 26 % Nplate� - ROW 48 51 (6 )% Kyprolis� - U.S. 97 62 56 % Kyprolis� - ROW 11 6 83 % BLINCYTO� - U.S. 15 - N/A Other - ROW 47 38 24 % Total other products $ 418 $ 322 30 % Total U.S. - other products $ 237 $ 163 45 % Total ROW - other products 181 159 14 % Total other products $ 418 $ 322 30 %
Operating expenses were as follows (dollar amounts in millions):
Three months ended March 31, 2015 2014 Change Cost of sales $ 1,033 $ 1,090 (5 )% % of product sales 21.2 % 25.0 % % of total revenues 20.5 % 24.1 % Research and development $ 894 $ 1,027 (13 )% % of product sales 18.3 % 23.6 % % of total revenues 17.8 % 22.7 % Selling, general and administrative $ 1,026 $ 1,023 - % % of product sales 21.1 % 23.5 % % of total revenues 20.4 % 22.6 % Other $ 58 $ 17 *
Other Other operating expenses for the three months ended March 31, 2015, included certain charges related to our restructuring plan, primarily severance, of $57 million. Other operating expenses for the three months ended March 31, 2014, included certain charges related to our cost savings initiatives, primarily severance, of $15 million. Non-operating expenses/income and income taxes Non-operating expenses/income and income taxes were as follows (dollar amounts in millions): Three months ended March 31, 2015 2014 Interest expense, net $ 252 $ 259 Interest and other income, net $ 106 $ 99 Provision for income taxes $ 253 $ 131 Effective tax rate 13.5 % 10.9 %
The decrease in interest expense, net for the three months ended March 31, 2015, was due primarily to a lower average outstanding debt balance in the current year period.
Interest and other income, net
The increase in interest and other income, net for the three months ended March 31, 2015, was due primarily to higher interest income as a result of higher average cash balances substantially offset by net losses on investments recognized in the current year period.
Our effective tax rate for the three months ended March 31, 2015 was 13.5% compared with 10.9% for the corresponding period of the prior year. The increase in our effective tax rate for the three months ended March 31, 2015, was due primarily to the unfavorable tax impact of changes in the jurisdictional mix of income and expenses, offset partially by a state tax audit settlement in the three months ended March 31, 2015.
Excluding the impact of the Puerto Rico excise tax, our effective tax rate for the three months ended March 31, 2015, would have been 17.1% compared with 15.4% for the corresponding period of the prior year.
See Note 3, Income taxes, to the condensed consolidated financial statements for further discussion.
Financial condition, liquidity and capital resources Selected financial data was as follows (in millions):
March 31, December 31, 2015 2014 Cash, cash equivalents and marketable securities $ 27,118 $ 27,026 Total assets $ 68,952 $ 69,009 Current portion of long-term debt $ 500 $ 500 Long-term debt $ 29,841 $ 30,215 Stockholders' equity $ 26,506 $ 25,778
Report on Form 10-K for the year ended December 31, 2014, Item 1A. Risk Factors-There can be no assurance that we will continue to declare cash dividends or that we will repurchase stock.
In December 2014, the Board of Directors declared a quarterly cash dividend of $0.79 per share of common stock, which was paid on March 6, 2015. In March 2015, the Board of Directors declared a quarterly cash dividend of $0.79 per share of common stock, which will be paid on June 5, 2015.
The Company also returns capital to stockholders through its stock repurchase program. Repurchase activity under the program was temporarily suspended from the second quarter of 2013 through the third quarter of 2014, and we reinitiated repurchase activity during the fourth quarter of 2014. During the first quarter of 2015, we repurchased $451 million of stock (cash settlement of stock repurchases totaled $464 million). As of March 31, 2015, $3.4 billion remained available under the Board of Directors-approved stock repurchase program. . . .