Long Term Strategy 2013
Click to download the PDF to view the full issue
Amgen is concentrating on the product pipeline, international expansion, and its entry into the biosimilar market to drive company growth during the years ahead.
Amgen executives cited 2012 as an exceptional year for the company. Amgen generated 11 percent revenue growth, 2 percent adjusted earnings per share growth, and 36 percent shareholder return. Building upon this success, Amgen entered 2013 with momentum in achieving its long-term strategy of reaching more patients in more markets globally. Management considers the company positioned for long-term growth.
Established during 1980, the worldwide biotechnology pioneer Amgen discovers, develops, manufactures and delivers innovative human therapeutics. Based in Thousand Oaks, Calif., the company’s medicines help millions of patients to combat cancer, kidney disease, rheumatoid arthritis, bone disease, and other serious illnesses. Amgen ranks as the world’s second-largest biotechnology entity after Roche.
Amgen in recent years has made a commitment to return significant capital to shareholders through dividends and share buybacks, and the company has delivered on that commitment. During early 2013, Amgen completed a $10 billion stock repurchase program that had been announced in October 2011. In a two-year period beginning with January 2011, the company repurchased over 20 percent of its outstanding shares. Also, from the initiation of its first dividend during July 2011 through early 2013, Amgen raised the dividend twice over the prior quarterly amount by a 30 percent average.
Amgen entered 2013 with various opportunities to continue growing its business. Management believes that the currently approved indications for Xgeva and Prolia represent significant commercial opportunities. Longer-term growth may additionally be attained by the successful development of the company’s later-stage pipeline, by expansion into emerging markets and Japan, and via strategic business-development opportunities.
The company anticipates generating pivotal data for eight pipeline molecules from 2013 to 2016. Amgen had six investigational drugs in Phase III development and five new molecular entities in Phase II trials as of early 2013 for treating cardiovascular disease, bone disease, inflammation, nephrology, oncology, and neuroscience.
In an effort to continue its leading ways in biologics manufacturing, the company in early 2013 revealed plans to build an innovative facility in Singapore. The site initially will concentrate on expanding Amgen’s capability for manufacturing monoclonal antibodies via a new process that will necessitate lower capital investment and produce greater flexibility.
Additionally during early 2013, Amgen announced its intent to enter the fast-growing biosimilar marketplace. The company initially expects to develop and manufacture six biosimilar molecules: four in the oncology disease field and two in inflammation. Management anticipates launching Amgen’s first biosimilar product during the course of 2017.
Another significant initiative in progress at Amgen involves the combination of the company’s innovative drugs with patient-friendly delivery devices. According to management, Amgen is confident that the increasing use of delivery devices to improve patient experiences will be a further differentiator for healthcare providers and patients in an increasingly competitive worldwide market.
Amgen continues to grow internationally, with plans to sell products in 75 countries by 2015 (compared with 56 countries in 2012). The company is making progress in entering the Japanese market via partnerships. For example, Amgen and Astellas Pharma agreed in May 2013 to jointly develop and commercialization in Japan five Amgen pipeline medicines for cardiovascular and bone diseases as well as cancer. The first potential commercial launch is projected for as early as 2016. Also, Amgen expects to launch its first drug in China in 2015.
Company Performance
2012 marked a record year for Amgen in terms of revenue, totaling $17.27 billion, which was a $1.68 billion improvement over the 2011 figure. The 11 percent increase was aided by 9 percent product sales growth driven by strong performance across the portfolio. Generating billion-dollar sales in 2012 were Enbrel ($4.24 billion), Neulasta ($4.09 billion), Aranesp ($2.04 billion), Epogen ($1.94 billion), and Neupogen ($1.26 billion). Amgen’s adjusted earnings per share rose 22 percent to $6.51 due to 15 percent adjusted operating income growth and lower shares outstanding.
Amgen anticipates 2013 will be a stronger year for the company on the revenue front, as demonstrated during the first six months of the year. First-half 2013 global revenue totaled $8.92 billion compared to the January-June 2012 amount of $8.53 billion. During the first six months of 2013, Amgen reported total product sales of $8.75 billion ($8.1 billion in 1H 2012): U.S. product sales reached $6.73 billion ($6.25 billion in 1H 2012) and rest-of-world product sales amounted to $2.01 billion ($1.85 billion during 1H 2012). Net income for first-half 2013 totaled $2.69 billion ($2.45 billion in 1H 2012) and diluted earnings per share were reported at $3.52 ($3.09 during 1H 2012).
“We saw solid product trends during the second quarter and are carrying good momentum into the second half,” said Robert A. Bradway, Amgen’s chairman and CEO, during July 2013. “We continue to make excellent progress with our pipeline of innovative molecules and look forward to multiple data readouts in 2014, including pivotal Phase III data for our cholesterol-lowering agent, AMG 145, in the first quarter.”
Product Performance
Amgen’s best-selling product is Enbrel, an inhibitor of tumor necrosis factor (TNF), a substance that plays a role in inflammatory diseases. The drug inhibits the binding of TNF to its receptors, which can lead to a significant reduction in inflammatory activity. TNF is a chemical messenger that helps regulate the inflammatory process. When the body generates too much TNF, it overwhelms the immune system’s ability to control inflammation of the joints or of psoriasis-affected skin areas. Enbrel binds particular TNF molecules before they can trigger inflammation.
Enbrel was introduced to the U.S. market during November 1998 and in Canada in March 2001. The medicine is indicated for treating adult patients with moderate-to-severe active rheumatoid arthritis; chronic moderate-to-severe plaque psoriasis patients who are candidates for systemic therapy or phototherapy; active psoriatic arthritis; and active ankylosing spondylitis. Enbrel is also indicated for reducing signs and symptoms of moderately to severely active polyarticular juvenile idiopathic arthritis in patients 2 years and older.
Enbrel remains the No. 1 biologic in the fast-growing rheumatology and dermatology segments. For 2012, the TNF receptor fusion protein produced sales of $4.24 billion for Amgen compared to $3.7 billion during the previous calendar term. The drug’s first-half 2013 sales as reported for the company advanced 10 percent year over year to $2.2 billion.
Enbrel is marketed in the United States and Canada by Amgen through a collaboration deal with Pfizer, which expires Oct. 31, 2013. Amgen has been paying Pfizer a percentage of annual gross profits on Enbrel sales in the United States and Canada attributable to all approved indications on a scale that increases as gross profits. After expiration of the joint-promotion pact, Amgen will pay Pfizer residual royalties, which are expected to be significantly less than what would be owed based on the terms of the Enbrel profit share. As a result, Enbrel’s profitability for Amgen will increase substantially in 2014.
Another multibillion-dollar franchise for the company is Neulasta and Neupogen. Neulasta is a pegylated protein based on the filgrastim molecule. Neupogen is a recombinant-methionyl human granulocyte colony-stimulating factor. The two drugs stimulate the production of neutrophils, a type of white blood cell that helps the body fight infection. An extremely low amount of neutrophils is a condition known as neutropenia. Amgen markets Neulasta and Neupogen mainly in the United States and Europe. Neulasta was introduced in the United States and Europe during 2002 and is indicated to decrease the incidence of infection associated with chemotherapy-induced febrile neutropenia in cancer patients with non-myeloid malignancies. Neupogen was launched in the U.S. and European marketplaces during 1991. Neulasta is administered as a single dose per chemotherapy cycle, whereas Neupogen necessitates more frequent dosing.
Neulasta global sales totaled $3.56 billion for 2010, $3.95 billion in 2011, and $4.09 billion during 2012. Neulasta worldwide sales amounted to $2.16 billion for the first six months of 2013. The 5 percent improvement over first-half 2012 was spurred by an increase in the average net sales price, offset partially by a decline in units.
Worldwide sales for Neupogen came to $1.29 billion for 2010 and $1.26 billion in each of 2011 and 2012. The drug’s sales for the first half of 2013 fell to $623 million after totaling $637 million in January-June 2012. The performance was driven by decreases in unit demand, partially offset by increases in the average net sales price and the Medicaid rebate adjustment.
The blockbusters Aranesp and Epogen are erythropoiesis-stimulating agents that stimulate the production of red blood cells. Amgen markets Aranesp primarily in the United States and Europe, where the drug was introduced in 2001. Aranesp is indicated for treating anemia associated with chonic kidney disease (in patients on dialysis and not on dialysis) and anemia due to concomitant chemotherapy in patients with non-myeloid malignancies. Epogen reached the U.S. arena during 1989. The product is indicated to treat a lower than normal number of red blood cells resulting from chronic kidney disease in patients on dialysis to lessen the necessity for red blood cell transfusions.
Global sales for Aranesp dropped from $2.49 billion during 2010 to $2.3 billion in 2011 to $2.04 billion for 2012. The worldwide sales decline continued during first-half 2013, falling 6% year-over-year to $992 million. The decrease in U.S. Aranesp sales in first-half 2013 resulted from a decline in units, offset partially by the Medicaid rebate adjustment and an increase in the average net sales price.
Epogen’s U.S. sales for Amgen totaled $2.52 billion in 2010, $2.04 billion for 2011, and $1.94 billion during 2012. The sales decrease in first-half 2013 was 4 percent to $937 million versus first-half 2012, though 2Q 2013 sales rose 15 percent over first-quarter 2013. The latter result reflects unit growth due to Amgen’s competitor’s peginesatide being removed from the market during first-quarter 2013, and to a lesser extent the Medicaid rebate adjustment.
Xgeva and Prolia consist of the same main ingredient (denosumab) but are approved for different indications, patient populations, doses, and frequencies of administration. Denosumab is a human monoclonal antibody that specifically targets RANKL, an essential regulator of osteoclasts (the cells that break down bone). Xgeva was launched in the United States during late 2010 for the prevention of skeletal-related events in adults with bone metastases from solid tumors. Prolia also was introduced in the United States during 2010 and is indicated for the treatment of postmenopausal women with osteoporosis at high risk for fracture.
Xgeva global sales grew from $351 million during 2011 – its first full year on the market – to $748 million in the following calendar term. The drug’s first-half 2013 amount came to $472 million versus $332 million in the corresponding 2012 period. Prolia reached $203 million during 2011 and $472 million for 2012. First-half 2013 sales amounted to $330 million, up 59 percent versus the January-June 2012 tally. The growth in worldwide Xgeva and Prolia sales in the first six months of 2013 were fueled by unit growth reflecting increased segment share.
The small-molecule calcimimeticSensipar/Mimpara lowers serum calcium levels. During 2004, Sensipar was approved in the United States and Mimpara gained clearance in Europe for treating secondary hyperparathyroidism in CKD patients on dialysis and for treating hypercalcemia in patients with parathyroid carcinoma. In 2008, Mimpara was granted approval in Europe for reducing hypercalcemia in patients with primary hyperparathyroidism (PHPT) where a parathyroidectomy is not clinically appropriate or is contraindicated. During 2011, Sensipar was cleared by FDA for treating severe hypercalcemia in patients with PHPT who are unable to undergo a parathyroidectomy.
Sensipar/Mimpara is on its way to blockbuster status. The product’s sales grew from $714 million during 2010 to $808 million for 2011 to $950 million in 2012. Global sales rose from $451 million during January-June 2012 to $523 million for the first six months of 2013.
In The Pipeline/Recent Drug Approvals
Amgen’s product pipeline concentrates on innovative, biological targets and molecules that tackle serious illnesses and fields of high unmet need. Amgen managers say this reflects the company’s strategic focus of unlocking the potential of patient biology. Amgen takes a “biology first” approach, meaning that the company examines the fundamental mechanisms of human biology to unravel disease complexities to interdict them with its products.
Amgen spent $3.38 billion on R&D in 2012 compared to $3.17 billion for 2011. The total for first-half 2013 amounted to $1.85 billion versus $1.56 billion during January-June 2012. R&D expenses for second-quarter 2013 rose 17 percent versus second-quarter 2012 to $967 million, mainly in support of Amgen’s later-stage clinical programs, including AMG 145.
AMG 145 represents perhaps Amgen’s most promising pipeline product. According to the company, AMG 145 has tremendous potential to impact the incidence of cardiovascular disease, a leading cause of death in America and globally. The molecule could be one of the first to help the millions of people not meeting their treatment goals to benefit from additional reduction of low-density-lipoprotein cholesterol.
Developed by Amgen scientists, the human monoclonal antibody AMG 145 inhibits Proprotein Convertase Subtilisin/Kexin Type 9. PCSK9 is a protein that reduces the liver’s ability to remove LDL-C, or “bad” cholesterol, from the blood. As a result, bad cholesterol increases. AMG 145 binds to PCSK9 circulating in the blood and prevents it from binding to LDL receptors located in the liver. Without PCSK9 bound to them, the LDL receptors can take up and remove bad cholesterol from the blood, recycle and remain available for binding additional LDL-C.
Other Amgen new drug compounds that advanced to Phase III development during 2012 were brodalumab, romosozumab and rilotumumab. Brodalumab is one of five inflammation monoclonal antibodies being co-developed in a collaboration with AstraZeneca. During October 2012, Amgen announced the beginning of Phase III studies in moderate-to-severe psoriasis. The studies include three Phase III trials studies with ustekinumab (marketed as Stelara by Johnson & Johnson) and/or placebo controls. Amgen completed a Phase II study for brodalumab in psoriatic arthritis in 2012. Brodalumab is additionally being evaluated for treating asthma.
As a highly selective human monoclonal antibody, brodalumab binds to and blocks signaling through the IL-17 receptor. The IL-17 pathway plays a significant role in inducing and promoting inflammatory disease processes. Brodalumab may be the only investigational treatment in development that blocks the IL-17 receptor, thereby blocking several of the IL-17 ligands at once from sending signals to the body.
By halting IL-17 ligands from binding with the receptor, brodalumab prevents the body from receiving signals that may result in inflammation and other conditions.
The humanized monoclonal antibody romosozumab inhibits the action of sclerostin. Amgen during April 2012 began two Phase III studies for the treatment of postmenopausal osteoporosis in women. The active-controlled trial versus alendronate (marketed as Fosamax by Merck) is evaluating the incidence of clinical fracture and new vertebral fracture at 12 and 24 months in 4,000 patients.
The new drug candidate romosozumab is being developed in collaboration with UCB. Amgen holds the rights to commercialize romosozumab for all indications in the United States, Canada, Mexico and Japan.
Rilotumumab is a human monoclonal antibody that inhibits the action of hepatocyte growth factor/scatter factor. Rilotumumab is being studied as a cancer treatment. Amgen launched a Phase III trial for treating gastric cancer during November 2012.
Xgeva became the first FDA-approved drug for treating giant cell tumor of bone (GCTB) during June 2013. Approved via priority review, Xgeva was cleared for treating adults and skeletally mature adolescents with giant cell tumor of bone that is unresectable or where surgical resection is likely to result in severe morbidity. GCTB typically affects individuals 20 years to 40 years of age. The disease is characterized by a bone destructive tumor that often leads to fractures.
Acquisitions
Amgen has made various acquisitions in 2012 and 2013 that have improved the company’s research capabilities and advanced its global expansion efforts. The largest one is the August 2013 purchase of Onyx Pharmaceuticals, cited as the fifth-largest biotech-biotech company deal in history. Amgen is expected to acquire all outstanding shares of Onyx for $10.4 billion, or $9.7 billion net of estimated Onyx cash.
Onyx is engaged in the development and commercialization of innovative cancer therapies. Onyx’s significant and growing multiple myeloma franchise includes Kyprolis (carflzomib) for Injection, FDA-approved during 2012 and projected by some industry analysts to have multi-billion annual sales potential. Onyx has three partnered oncology assets: Nexavar in partnership with Bayer HealthCare, which marketed for unresectable hepatocellular carcinoma as well as advanced renal cell carcinoma and generated more than $1 billion in 2012 sales; Bayer’s Stivarga tablet, which is FDA-approved for metastatic colorectal cancer; and the Pfizer drug candidate palbociclib in Phase III for advanced breast cancer. Onyx has multiple oncology compounds in clinical development.
Amgen is anticipating the benefits from the worldwide rights to Onyx’s innovative oncology portfolio and pipeline. Amgen plans to leverage its oncology capabilities and experience to support Onyx’s clinical-development programs and maximize Kyprolis’ global potential. The acquisition additionally adds to Amgen’s robust late-stage pipeline, which includes nine innovative products for which registration-enabling data are expected by 2016; four of these are regarded as innovative, first-in-class oncology products.
deCode Genetics, a worldwide leader in human genetics, was purchased by Amgen for $415 million in cash as announced in December 2012. deCode has discovered genetic risk factors for dozens of diseases varying from cardiovascular disease to cancer.
Financial Performance And Product Sales
| PRODUCT | 2012 SALES | 2011 SALES |
|---|---|---|
| Enbrel | $4,236 | $3,701 |
| Neulasta | $4,092 | $3,952 |
| Aranesp | $2,040 | $2,303 |
| Epogen | $1,941 | $2,040 |
| Neupogen | $1,260 | $1,260 |
| Sensipar/ | ||
| Mimpara | $950 | $808 |
| Xgeva | $748 | $351 |
| Prolia | $472 | $203 |
| Nplate | $368 | $297 |
| Vectibix | $359 | $322 |
All sales are in millions of dollars.
| 2012 | 2011 | |
|---|---|---|
| Revenue | $17,265 | $15,582 |
| Net income | $4,345 | $3,683 |
| Diluted EPS | $5.52 | $4.04 |
| R&D | $3,380 | $3,167 |
| 1H13 | 1H12 | |
|---|---|---|
| Revenue | $8,917 | $8,525 |
| Net income | $2,692 | $2,450 |
| Diluted EPS | $3.52 | $3.09 |
| R&D | $1,845 | $1,562 |
All figures are in millions of dollars except EPS.
