AMGN

Amgen Inc. (AMGN)

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Amgen (AMGN)

Q2 2011 Earnings Call

July 29, 2011 11:00 am ET

Executives

Arvind Sood - Vice President of Investor Relations

Jonathan Peacock - Chief Financial Officer and Executive Vice President

Roger Perlmutter - Executive Vice President of Research & Development

Kevin Sharer - Chairman of the Board, Chief Executive Officer, Chairman of Executive Committee and Member of Equity Award Committee

Robert Bradway - President and Chief Operating Officer

Analysts

Sapna Srivastava - Goldman Sachs Group Inc.

Robyn Karnauskas - Deutsche Bank AG

Geoffrey Porges - Sanford C. Bernstein & Co., Inc.

Joel Sendek - Lazard Capital Markets LLC

M. Ian Somaiya - Piper Jaffray Companies

Joshua Schimmer - Leerink Swann LLC

Yaron Werber - Citigroup Inc

Michael Yee - RBC Capital Markets, LLC

Christopher Raymond - Robert W. Baird & Co. Incorporated

Eric Schmidt - Cowen and Company, LLC

Mark Schoenebaum - ISI Group Inc.

Eun Yang - Jefferies & Company, Inc.

Matthew Roden - UBS Investment Bank

Geoffrey Meacham - JP Morgan Chase & Co

Presentation

Operator

My name is Dennis, and I will be your conference facilitator today for Amgen's Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Arvind Sood

Thank you, Dennis. Good morning, everybody. I would like to welcome you to our second quarter results conference call. Probably the best way to characterize this quarter is solid revenue growth both in the U.S. and in international markets and good business momentum, as we embark in the second half of this year.

This morning, I'm joined by our Chairman and CEO, Kevin Sharer, who will provide a strategic overview of our performance during the quarter. Jon Peacock, our CFO will then go into additional detail on our financial performance during the quarter. Our President and Chief Operating Officer, Bob Bradway, will then provide some additional color on how our products performed during the quarter, followed by our Head of R&D, Roger Perlmutter who will provide an R&D update.

We'll use a handful of slides for our presentation today. These slides have been posted on our website and a link was sent to you separately by e-mail.

I would like to remind you that our comments today will be governed by our Safe Harbor statement, the gist of which is that through the course of our presentation today, we may make certain forward-looking statements and actual results could vary materially.

Although we'll use non-GAAP financial measures to help you understand our underlying business performance, the GAAP reconciliations are provided in our press release.

So with that, I would like to turn the call over to Kevin.

Kevin Sharer

Thank you, Arvind. Good morning, everyone. I know that we speak to you today in an environment, a macro environment, of substantial uncertainty and the markets understandably reflect that uncertainty. However, when I focus on our business, I see progress on literally all fronts. We'll go over that progress today in each of our separate comments. But I want to reflect back on our last conversation, April 21, when we shared our business plan and our guidance through 2015. That was just a few months ago, but many things have happened since then. And I want to reiterate my conviction about that 2015 guidance and the various business elements that we outlined in building up our conviction around why we will deliver those numbers or better.

We had some uncertainties that day that are not uncertainties any longer. We'll talk about that in depth today. I know that you are interested in, and I understand why, our ESA business particularly EPOGEN. We're prepared to discuss that in depth. And while there's still a few uncertainties in the EPOGEN business compared to what I was thinking and seeing on April 21, I feel much more clarity around how that business will move going forward. Bob will share that with you.

I also want to point to the 8% product sales growth year-over-year, significant numbers and I'm proud of the effort behind that, and I'm optimistic about what it foretells for the future. We're also making the commentary, given these results, that we expect our guidance for 2011 to be at the top end of the range. So when I look at Amgen today, I feel great optimism and confidence about the future. And I want to thank all of the Amgen staff, I know many of whom are on this call, for their tremendous effort in delivering these great results this quarter and everything I know they'll do for patients and shareholders going forward.

So I'd like now to turn the call over to our Chief Financial Officer, Jonathan Peacock who'll give you, a more in-depth briefing on our financials and strategy. Jonathan?

Jonathan Peacock

Thanks, Kevin. So if we turn to Page 5 on the deck, that gives a summary of our financial performance for the quarter compared to the same period in 2010.

Revenues overall were up 4%. But as Kevin mentioned, product sales grew at a much stronger rate, up 8%, driven by good performance across our portfolio, particularly from NEUPOGEN, Neulasta and Enbrel. Bob will talk more about this in a few minutes.

Other revenues were down by $125 million due to certain milestone payments received in 2010 from GSK for Prolia approvals in Europe and from Takeda for the Vectibix approval in Japan.

You'll see that operating expenses grew 15% or $329 million in, the quarter. This included $47 million for the new Healthcare Reform fee; $45 million for Puerto Rico excise taxes recorded in cost of sales, and for which we receive an offsetting foreign tax credit in our federal income taxes; and also $40 million increase in profit share payments to Pfizer as a result of higher Enbrel sales. Of the remaining increase of just under $200 million, $166 million, more than 80%, relates to the increase in research and development spending in the quarter.

Read the rest of this transcript for free on seekingalpha.com