It's been a great 2017 for Amgen (NASDAQ: AMGN) shareholders so far. Amgen stock is up close to 30%. The company announced several positive developments from its pipeline. Still, though, some questions remain about what's next for the big biotech.
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Amgen CEO Robert Bradway and CFO David Meline sat down on Tuesday at the Morgan Stanley healthcare conference to answer some of those questions. Here are three things the Amgen executives said that investors will want to know.
1. Repatha remains a significant opportunity for Amgen
It's fair to say that the launch for Repatha has been a big disappointment so far. Despite winning its first regulatory approval in 2015, the cholesterol drug generated revenue of only $141 million in 2016. While sales are growing, with Repatha bringing in $132 million in the first half of this year, they're still far below the blockbuster level that many expected.
Bradway said that Repatha nonetheless remains a significant opportunity for Amgen. He noted that a key step for the drug to achieve more of its potential is the FDA decision expected in December about updating the drug's label to include risk reduction of major cardiovascular events based on data from Amgen's large cardiovascular outcomes study. Amgen can't promote the positive outcomes data until the label is revised.
Bradway also acknowledged that Amgen had "a lot of work to do" in the short term. He said the company needed to better educate physicians, patients, and payers about the benefits of Repatha. Bradway was pleased that several major medical societies have updated their guidelines to reflect treatment using PCSK9 inhibitors like Repatha.
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Has the price tag for Repatha limited its market volume? Bradway would only say that "the marketplace is working." He stated that the drug is "available at prices that reflect the value for the therapy." Bradway didn't comment on Amgen's decision to offer a money-back guarantee for Repatha.
2. Exciting programs in the pipeline
Bradway said that Amgen is excited about several of its pipeline programs, first highlighting the company's late-stage migraine candidate erenumab. He noted that the drug is the first calcitonin gene-related peptide (CGRP) inhibitor to be reviewed by regulatory agencies. The FDA is scheduled to make an approval decision on erenumab in May 2018.
Meline stated that the company's decision to partner with Novartis (NYSE: NVS) in commercializing erenumab came after looking at the market "to see what it would take to win." He noted that Amgen already had an international alliance with Novartis and felt that the best strategy for success was to expand that partnership to include the U.S.
The Novartis deal also brought Amgen a late-stage Alzheimer's disease candidate, AMG520. Bradway said that Amgen's Iceland-based subsidiary, deCODE Genetics, provided "a number of insights" that will help the company in its Alzheimer's disease program. He acknowledged that "a lot of our competitors have abandoned neuroscience," adding that it was "fine" for them to do so. But he said "the next decade or two for Amgen in neurosciences will be very exciting."
While much of the discussion at the Morgan Stanley conference focused on Amgen's neuroscience pipeline, Bradway also mentioned several other promising programs. He highlighted experimental asthma drug tezepelumab, which Amgen and partner AstraZeneca (NYSE: AZN) are advancing to a late-stage study. He also said Amgen was excited about its work in oncology, particularly with combination studies of Imlygic with checkpoint inhibitors.
Meline also mentioned that Amgen was "pleased with its progress on biosimilars." He noted that a decision was expected by the FDA this week on a biosimilar to Avastin and that 10 molecules were "progressing according to plans."
3. How its huge cash stockpile and cash flow will be used
Perhaps the question that investors most want to have answered is: What will Amgen do with its more than $40 billion in cash? Bradway's first response was that Amgen "is trying to find acquisitions that add value for our shareholders" and not just the other company's shareholders. He said, "Valuations have been stretched." As for where Amgen would focus its acquisitions efforts, Bradway said that the company currently targets six therapeutic areas and would look in those same areas.
Meline added that Amgen continues to generate "solid and stable cash flow" of around $9 billion annually. He noted that around half of that amount is generated outside of the U.S. Meline indicated interest in the prospects for U.S. corporate tax reform that could allow for repatriation at a discounted tax rate.
Regardless of what happens with tax reform, though, Meline said that Amgen remains committed to returning 60% of total cash flow to shareholders in the form of share buybacks and dividends. He also stated that Amgen has "lots of capacity" to find the right assets and opportunities for acquisitions.
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