Amgen Inc. (AMGN) Q4 2017 Earnings Report, Transcript and Summary

My name is Skinner and I will be your conference facilitator today for Amgen’s Fourth Quarter 2017 Financial Results Conference Call. [Operator Instructions] I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Okay. Thank you, Skinner. Good afternoon everybody. I would like to welcome you to our conference call to discuss our business performance for 2017 and our outlook for 2018. Although our results exemplify our focus on volume driven growth, tax reform has created profound changes and opportunities for our industry and our company. So to begin this dialogue, our Chairman and CEO, Bob Bradway will provide some perspective, followed by our CFO, David Meline who will review our Q4 and full year 2017 results and provide guidance for 2018. Our Head of Global Commercial Operations, Tony Hooper, will review our product and geographic performance in 2017, followed by our Head of R&D, Sean Harper, who will provide a pipeline update. As in the past, we will use slides corresponding to our presentation today and a link to these slides was sent earlier. We plan on using non-GAAP financial measures in today’s presentation to provide information, which maybe useful in understanding our ongoing business performance. However, these non-GAAP financial measures should be considered together with GAAP results and reconciliations of these measures are available in the schedules accompanying today’s press release, a Form 8-K and also on the Investor Relations section of our website. Just a reminder that some of the statements made during the course of our presentation today are forward-looking statements and our 2017 10-K and subsequent filings identify factors that could cause our actual results to differ materially. So with that, I would like to turn the call over to Bob.

Okay. Thank you for joining our call. We have more ground than usual to cover with you in our prepared remarks this afternoon. We will be addressing not only our results for 2017 and our outlook for this year, but also the impact of tax reform, which we see is a very favorable development for our business. To kick off, I would offer that with another year of strong performance behind us, we are even more excited about the long-term prospects for our business than we were a year ago. In 2017, we continued to deliver solid operating performance as earnings per share growing 8% and operating margins improving to an industry leading 53.5%. In capital terms, payout to our shareholders grew by 14% as we improved our return on capital to 33%. We delivered these results in a period of increased competition for many of our largest products, several of which have lost patent protection and while continuing to invest heavily in the future of our business. Our steady progress through 2017 places us squarely on track to deliver against the long-term commitments we set several years ago for 2018. We entered 2018 in a strong position and confident about our long-term outlook. Those franchises which have come off patent in nephrology and oncology had held up well and we expect them to remain competitive. The brands that we expect to drive our future growth led of course by Repatha, Prolia, and KYPROLIS, with Aimovig and the biosimilars coming close behind are emerging now and the strong data we have to support them are encouraging. And finally, we have stable cash flows and the strong balance sheet both of which are improved by tax reform. We intend to use our resources to continue to invest in our people and the attractive long-term growth opportunities we see in our industry, including M&A where it fits our focus while also returning capital to our shareholders. To be successful in the long run in our industry, we think it will be essential to have innovative, differentiated medicines that deliver large beneficial effects for patients suffering from serious illness and to demonstrate that these medicines provide value for all stakeholders in the healthcare system. We have a number of these medicines on the market now and in our pipeline, some of which meet the needs of large patient populations and some of which are for more specialized markets. With pressure on prices globally, we think revenue growth will be more tightly linked to volume growth and was the case historically. In this regard medicines that serve the needs of large numbers of patients will be particularly attractive growth drivers. Repatha is a clear example of this. On this call last year, we announced the successful conclusion of the Repatha outcomes trial. Now following an expedited review by the FDA, we are able to talk to patients, payers and prescribers about the unique role of Repatha in significantly reducing the risk of heart attack and stroke. Cardiovascular disease is the single greatest problem facing healthcare systems around the world today. And as the population ages globally, this problem will only grow unless we embrace important new innovations. Repatha is exactly the type of innovation needed today by millions of patients to bring down the risk of cardiovascular disease. Our job now is to see the prescribers, patients and payers understand this product and recognize the importance of adopting it for high risk patients. As they do, we expect Repatha to be the important growth driver for us for many years to come. We will continue to work to ensure that patients gain access to this therapy worldwide especially those for whom other therapies have not proven effective. Like Repatha, Prolia represented a paradigm change in biologic when it was first launched for osteoporosis. Today it is of course the leading osteoporosis therapy. In fact there are 3.5 million patients worldwide taking Prolia. And the demand for it continues to grow by double digit percentages. With only 25% of women in the U.S. who might benefit from osteoporosis therapy receiving it, we continue to see significant growth potential for Prolia in osteoporosis. In our pipeline, I will highlight two products which have similar attractive characteristics, but which address more symptomatic diseases. One of these is Aimovig and a first in class product to prevent migraine. Current therapies don’t work adequately for this debilitating disease and patients and prescribers are anxious to have a better option. We are hopeful that Aimovig which uniquely blocks the CGRP receptor will be the answer that millions of patients have been waiting for. The other product I will highlight is Tezepelumab, a first in class molecule that has shown very encouraging Phase 2 results in treating asthma there. There are millions of asthma sufferers worldwide in need of better therapy. We are hopeful that Tezepelumab might be just that and we are actively enrolling the Phase 3 trial to establish the answer. We have enjoyed great success in specialty markets historically and with our innovative medicines and we expect that to continue. XGEVA represents a good example of this. And with the addition of multiple myeloma to our label, we would expect to see more growth from this product beginning in 2018. In cancer more generally, overall survival is the gold standard. We entered 2018 with fresh overall survival data in our labels for KYPROLIS and BLINCYTO. KYPROLIS has established strong share in second and later lines of multiple myeloma therapy. We expect the addition of overall survival data to strengthen its appeal to physicians, payers and patients. With overall survival for relapse refractory acute lymphoblastic leukemia patients BLINCYTO was a game changer in its own right, but importantly it provides confidence for the long-term outlook for our broader BiTE platform. We have 12 BiTE programs progressing in both liquid and solid tumors. And data over the next 2 years will inform the future for many of these molecules. 2018 will be another year of new product launches for Amgen. In addition to our launch plans for Aimovig, we are extending our long-standing leadership in nephrology with the launch of Parsabiv, a specialty product for kidney disease in a number of companies – countries rather, including the U.S. Finally, I want to highlight that we have clarity now around AMGEVITA, our adalimumab biosimilar. And we look forward to launching that internationally later in the year. This will be the first of our biosimilars to launch. We have a strong portfolio coming behind it with one other approval already and several Phase 3 programs waiting approval and launch. We think these recommend – represent compelling growth opportunities for us around the world. We think tax reform provides a number of important benefits for our company. First, it puts us on a more level playing field strategically with our international competitors who previously were advantaged by lower rates and global access to their cash. Second, in addition to a more level playing field, tax reform clearly provides incentives for us to invest heavily in innovation and advanced technologies here in the U.S. and that is exactly what we will do. The timing of tax reform is particularly relevant for us right now as we are on the cusp of deploying our so-called next-generation bio-manufacturing technologies, which enable us to make biologics with much improved productivity, a smaller footprint and much reduced levels of waste and environmental impact. We developed these technologies in the U.S. and thanks to tax reform. We will now build new manufacturing capacity and add highly skilled jobs here in the U.S. to capitalize on them. It’s worth noting that with tax reform we will make product in the U.S. and export it to cover 85% of our international sales. With improved clarity on tax reform, we expect to invest on the order of $2.5 billion in capital expenditures in the U.S. over the next 5 years. We see tax reform benefiting us in other areas as well. Amgen Ventures, our vehicle for early-stage investing will also make close to $300 million available for new investments in innovative biotechnology, digital healthcare information companies. We will also grow our already substantial commitment to our communities with plans for the Amgen Foundation’s investments in the proven Amgen scholars and Amgen biotech experienced programs, which we expect to reach $100 million of commitment within 4 years. We have engaged some 600,000 high school and college students in person through these programs consider this our commitment to helping build a pipeline of talented scientists and biologists in the U.S. and beyond. Through our Foundation’s philanthropic giving, we expect to deploy $100 million over the next 5 years in the communities where we work and live. We have also assessed the tax reform will be generally positive for our staff, especially for our non-executive U.S. staff who number about 12,000. We estimate that lower personal tax rates, combined with investments we are making in enhancing base wages for these staff, will create literally thousands of dollars of improvement in the average take-home pay for our typical U.S. non-executive staff member. When you pair all of this with the fact that some 90% of all Amgen staff members globally have held Amgen stock, you can see that the benefits of tax reform will be quite broad. Finally, tax reform also provides us with more flexibility for capital deployment. Since 2011, we have invested more than $42 billion in research and development, innovation-based acquisitions and long-term oriented capital expenditures. We expect to continue making such long-term investments now, while also being able to return excess capital to our shareholders in the form of growing dividends and share buybacks. Based on our confidence and the long-term outlook for the business is enhanced by the benefits of tax reform we have increased our share repurchase authorization by $10 billion. We expect to retire shares on an accelerated basis this year as David will describe shortly. As I highlighted for you, the benefits of tax reform for our shareholders do not come at the expense of others, but come in addition to the investments that we are making for our staff, the patients we are seeking to serve and our communities. So, to reiterate, we are operating the business well. You have seen that in our financials and you saw it in our successful response to the extraordinary challenge of Hurricane Maria too. Our in-market products are strong. We have attractive assets advancing in the pipeline and we have a strong balance sheet. Strategically, we are well-positioned to adapt to the growing pressures in the healthcare environment and to capitalize on consolidation opportunities for our shareholders. Let me conclude with a word of thanks to our staff around the world for their tireless devotion to our mission. I can assure you they are focused on serving patients and driving growth in 2018 and beyond. Let’s turn to David.

Okay. Thanks Bob. Before I review our results and guidance, I would like to take a moment to reflect on our performance over the last several years. As Bob mentioned, we entered 2017 as another year, which presented significant challenges related to the transition of our portfolio as well as the evolving competitive dynamics of the industry as a whole. In the face of these expected and other not so expected challenges including Hurricane Maria, I am pleased to report that we delivered positive performance again in 2017. Additionally, with regard to our 5-year goals, we have already delivered or have clear line of sight to delivering on the commitments we established in 2014. The first goal was to achieve a substantial improvement in our operating efficiency agility and speed with the resulting outcome of the non-GAAP operating margin between 52% and 54%, representing a 15 point increase at the midpoint. We achieved this objective starting in 2016, 2 years ahead of our commitment. Second, in 2017 we delivered the $1.5 billion transformation savings commitment and will exceed that goal in 2018. Third through our next-generation bio-manufacturing capability as well as other efforts to optimize our fixed capital infrastructure, we are on track to meet our 2018 goal of reducing our facility footprint by 23%. Finally, based on today’s 2018 guidance I am pleased to confirm our expected delivery on the other key objectives of both double digit non-GAAP EPS growth and providing returns to shareholders of at least 60% of non-GAAP net income on average during the period 2014 to 2018. These commitments are being achieved before benefiting from tax reform which further enhances Amgen’s performance in 2018 and beyond. Now let’s turn to the fourth quarter financial results on Page 6 of the slide deck. Revenue at $5.8 billion declined 3% year-over-year. This quarter we saw worldwide product sales at $5.6 billion as unit demand from our growth products largely offset mature product declines. We are particularly encouraged by our 10% year-over-year volume growth in markets outside the U.S. reflecting the value of our innovative products in these international markets, many of which have experienced biosimilar competition and portfolio transition for a number of years. Other revenues at $233 million, decreased $69 million year-over-year as a result of the milestone payment received in the fourth quarter of 2016 related to the out-licensing of AMG 139. Our Q4 non-GAAP operating income at $2.6 billion declined 11% from prior year. Non-GAAP operating margin was 45.9% for the quarter. As previously indicated our operating expenses reflected the typical underlying fourth quarter pattern. We also experienced a number of additional expenses in the quarter including $79 million of Hurricane Maria recovery costs, incremental expenses accelerated for tax planning purposes, as well as inventory related costs. Finally, we increased our investments in support of volume driven growth as we expand activities for our products addressing unmet medical needs in large patient populations, including launch preparations in advance of the upcoming Aimovig launch. These increases were partially offset by continued favorable expense impacts from our transformation initiatives across all operating expense categories and the expiry of the Enbrel residual royalty payment on October 31, 2016. Other income and expenses were a net $31 million expense in Q4. This is favorable $171 million on a year-over-year basis. This year-over-year favorability was primarily due to higher interest income, gains in our venture portfolio and gains from investment portfolio rebalancing in the fourth quarter of this year, coupled with favorable compares on both of these items in 2016. A portion of these activities were taken in anticipation of changes in tax and accounting standards effective in 2018. The non-GAAP tax rate was 16.6% for the quarter, a 2.1 point improvement versus Q4 of 2016 reflecting favorable changes in the geographic mix of earnings this year. While not impacting our non-GAAP P&L, we incurred a $6.1 billion charge on our fourth quarter GAAP P&L related to U.S. corporate tax reform, including the repatriation tax and revaluation of net deferred tax liabilities. The repatriation tax will be paid to the U.S. government over an 8-year period. Non-GAAP net income decreased 3% and non-GAAP earnings per share, was flat year-over-year for the fourth quarter. Please find a summary of our 2017 full year results on Page 7 of the presentation. Our 2017 full year revenues declined 1% to $22.85 billion, while our non-GAAP earnings per share grew 8% to $12.58 per share. For the full year, we saw flat worldwide product sales growth of $21.8 billion. Changes in foreign exchange had a 1% negative impact to total revenue and product sales for the full year on a year-over-year basis. For the full year, non-GAAP operating income at $11.7 billion grew 2% from prior year, including $146 million of nonrecurring expenses associated with the recovery from Hurricane Maria. Our non-GAAP operating margin improved by 1.2 points to 53.5% for the year as we realized the benefits from our ongoing transformation initiatives and the expiry of the Enbrel residual royalty payment. On a non-GAAP basis, cost of sales as a percent of product sales increased 5.2 points to 13.5% driven primarily by expenses related to Hurricane Maria recovery efforts. Unfavorable product mix and other inventory costs offset partially by lower royalties and manufacturing cost efficiencies. Research and development decreased 7% year-over-year driven primarily by lower external business development expenses and lower spending required to support certain later stage clinical programs. SG&A expenses decreased 2% year-over-year due to the expiration of the Enbrel residual royalty partially offset by our increasing investments to drive volume growth in our products, which address unmet needs in large patient populations. In total, non-GAAP operating expenses decreased 3% year-over-year to $11.2 billion. Through the end of 2017, overall operating expenses have decreased by approximately $500 million versus 2013 levels. Included within this total is an incremental annual expense of $1.5 billion required to launch and maintain new products, build out new therapeutic areas, advance our biosimilars business and increase our global presence. Other income and expenses were favorable by $255 million on a year-over-year basis due to higher interest income on our higher cash balances as well as venture portfolio gains and milestones we realized across the course of the year. The non-GAAP tax rate was 18% for the full year, down 0.8 points versus 2016. The year-over-year decline was primarily driven by changes in the geographic mix of earnings offset partially by lower tax benefits from share-based compensation payments. Turning next to cash flow and the balance sheet on Page 8. For the full year 2017, Amgen continued to demonstrate strong and durable cash flow generation with $10.5 billion in free cash flow versus $9.6 billion last year. This increase was primarily driven by higher operating income and favorable changes in working capital. Cash and investments increased to $41.7 billion. This balance included $3.1 billion in the U.S. and $38.6 billion outside the U.S. Total debt outstanding at year end totaled $35.3 billion and carries a weighted average interest rate of 3.7% and an average maturity of 12 years. In 2017, we deployed $3.1 billion to repurchase 18.5 million shares at an average of $169 per share. At the end of 2017, we had $4.4 billion remaining on our existing share repurchase authorization. Additionally for 2017, we increased our dividend per share by 15% to $1.15 per quarter, with payments totaling $3.4 billion. Based on our confidence in the future outlook for the enterprise and our continued commitment to our capital allocation strategy, we also announced a 15% increase to the dividend to $1.32 per share for the first quarter of 2018. Turning to the outlook for the business for 2018 on Page 9, 2018 will be another important year for Amgen as we continue investing in the pipeline, building out our global business and supporting our new product growth. In anticipation of this opportunity we transform the business over the past several years to enable us to fully invest from a position of strength. This transformation allows us to deliver industry leading financial performance while continuing to invest for long-term growth and success. Our 2018 revenue guidance is $21.8 billion to $22.8 billion and our non-GAAP earnings per share guidance is $12.60 to $13.70 per share. Our non-GAAP tax rate guidance reflecting the impact of tax reform is 14% to 15% and we expect capital expenditures of approximately $750 million this year. There are several key assumptions embedded in our outlook that I would like to take a moment to share. First, our revenue guidance reflects both continued positive momentum from our newer products as well as evolving competitive dynamics related to our legacy products. We have important growth opportunities with the inclusion of outcomes data in Repatha’s label. Our plan to launch new products including Aimovig and AMGEVITA and the added flexibility enabled by tax reform to use our strong cash flow and balance sheet to drive continued growth of the company. We also embrace the potential challenges including the possible generic competition to Sensipar, continuing competitive dynamics for Enbrel and expected new competition against Neulasta and Aranesp. With regard to Sensipar, although the composition of matter patent expires in March, we are involved in litigation over pediatric exclusivity with the FDA and separately over the formulation patent with potential generic competitors. Although we believe in the strength of our position uncertainty as to the timing of competition will remain until the outcome of these litigations becomes clear. Also note that historically the first quarter represents the lowest product sales quarter for the year. For 2018, we expect this pattern to continue. Tony will provide further details related to this in this remarks. With respect to other revenue, for the full year 2018 we expect to see 15% year-over-year growth. The quarterly run rate will be impacted by an unfavorable true up of a royalty in Q1, offset by incremental milestones in the second half of the year. From an operating margin perspective since 2016 we have delivered on our commitment of a non-GAAP operating margin between 52% and 54%. And based on today’s guidance we expect to again operate in this range in 2018 as we continue to invest in our products to drive volume growth in large patient populations. Going forward, we will continue to evaluate incremental investments including acquisitions to drive growth and maximize shareholder value. The recently passed tax reform legislation provides significant financial flexibility in the form of a globally competitive tax rate and immediate access to the year end 2017 ex-U.S. cash balance of $39 billion. With regard to 2018 guidance, our non-GAAP tax rate is forecast between 14% and 15%. This incorporates a 21% tax rate on U.S. earnings and 10.5% tax rate on ex-U.S. earnings. With regard to capital deployment, our principles over the next several years are as follows. First, we will invest in our business as we continue to expand our pipeline and seek to drive long-term volume growth globally across large patient populations. We will also invest in greater manufacturing capacity to support the volume growth we foresee. For the first time in several decades, tax reform enables us to competitively consider investment in the U.S. As a result over the next 5 years we expect to invest approximately $3.5 billion in capital expenditures. Starting in 2018, approximately 75% of that investment will be in the U.S., up from about 50% in recent years. As Bob mentioned a key component of our U.S. capital investment strategy includes a new drug substance manufacturing plant which will be built using our next-generation bio-manufacturing capability. We expect to complete this expansion in about half the time of a conventional plant for approximately one-third of the cost. In addition to investing internally, we continued to pursue external opportunities to accelerate the growth of our business in our chosen therapeutic areas as well as accelerating our global build-out. Furthermore, we will invest an additional $300 million in our venture fund. Our venture fund is an important tool to ensuring we are appropriately informed, engaged and invested in cutting edge advances in science, technology and innovation. Since 2004, we have invested over $0.5 billion in our venture funds. In addition to their scientific importance, these investments have generated returns well above our cost of capital. Second, we will remain committed to an optimal capital structure in order to minimize or weighted average cost of capital by deploying any excess accumulative – accumulated capital and fully deploying cash flows going forward. As a first step to accomplishing this objective, we have received Board authorization to purchase up to $10 billion of our common stock. This is an addition to the previously approved share repurchase authorization which remained at $4.4 billion at the end of 2017. Given the scale of excess capital we have to deploy, our plan is to proceed with the Dutch auction equity tender offer, consistent with the approach we used successfully in 2011. This tender offer would be for up to $10 million and would commence as early as next week. Further, we may repurchase up to our full authority in the first half of 2018. The optimization of a capital structure will result in higher net interest expense in 2018 and beyond as we will have less interest income due to lower cash balances. For 2018 this results in expected other income and expense of $600 million to $700 million net expense. As we deploy our excess capital in the most efficient manner over the next several years, we could find that it is important prudent to pay some upcoming debt maturities in cash rather than refinancing in the market. This would translate directly into additional financial flexibility and debt capacity that we could choose to redeploy in the future. Third, we will continue to provide meaningful returns to shareholders through both the previously mentioned share repurchases as well as continued dividend growth. Finally, today’s revenue and non-GAAP EPS guidance ranges are wider than we typically have provided at the start of the year, which is primarily a reflection of the range of sense of our scenarios in addition to the other ongoing uncertainties outlined earlier. It is important to recognize that our guidance today does not include the impact of potential future M&A activities. In summary, we delivered another year of strong financial results in 2017 and we remain confident in the outlook for Amgen success in 2018 and beyond. This concludes the financial update. I will now turn the call over to Tony.

Thank you, David. I would like to begin with a few comments on our overall performance in 2017 followed by a review of our product performance. On the full year basis 2017 sales were in line with 2016 as the growth of our newer products offset the decline in our mature brands. We saw this play out again in quarter four as robust volume growth led by Prolia and our recently launched brands offset volume declines in Enbrel, ESAs and NEUPOGEN. Our international performance in quarter four led by Europe as David said was strong with 70% growth excluding the impact of foreign exchange, driven by volume growth of 10%. The European portfolio has already transitioned to the majority of sales from newer brands leading to strong volume growth for the overall portfolio. I am pleased with our execution in 2017 and our team has made excellent progress across a number of strategic fronts in building the foundation for long-term volume driven growth. We drove volume growth across several important brands led by Prolia. We defended Enbrel and several of our material brands against increasing competition. And we executed some patient focused lifecycle management strategies. We continue to advance our recently launched products with impressive new clinical data. The most significant of course being Repatha OUTCOMES data as well as three new sets of overall survival data, two for KYPROLIS and one for BLINCYTO. We also began laying the foundation for our next wave of launches as we prepare for Aimovig, a migraine product in the U.S. and AMGEVITA, our Humira biosimilar in Europe later this year. This will be an exciting milestone as we begin to commercialize our biosimilars in 2018. I am confident that we are well-positioned to capitalize on the opportunities within our portfolio of innovative and differentiated medicines. Turning now to our product performance, Prolia ended 2017 with another impressive quarter of 24% growth year-over-year. On a full year basis, Prolia grew 20% and as Bob said now presold with 3.5 million patients globally. In the U.S. we achieved a record number of new patient starts in 2017. After 7 years in the market this growth of new patient initiation underscores the continuing unmet medical need. Once patients are initiated on Prolia we have a good track record of sustained repeat injections. While this is a great progress, there are 100 million patients worldwide who suffer from osteoporosis. In the U.S. one in every two women above 50 will suffer an osteoporotic fracture. So we continue to work to improve both the diagnosis and the treatment of osteoporosis as we grow Prolia’s market share within the market. With this unique profile and through continued and sustained investment, we expect Prolia will remain a very strong growth driver. Turning on to our oncology brands, KYPROLIS grew 24% year-over-year with strong performance internationally. Uptake in these markets remains robust. Fourth quarter sales in Europe have doubled from the fourth quarter 2016. In the U.S. KYPROLIS now has two compelling sets of overall survival data in both doublet and triplet regimens that demonstrate a 21% reduction in the risk of death versus standard of care in each setting. The FDA just approved adding the impressive overall survival data from endeavor study to a label. KYPROLIS plus dexamethasone is the only preferred doublet regimen in the NCCN Guidelines. We look forward to the equally impressive overall survival data from ASPIRE being added to our label later this year. These data are, without doubt, differentiators and should reset the treatment paradigm as the new standard of care for relapse multiple myeloma patients. Our focused message to physicians is pretty clear. Patients will relapse or live longer when treated with regimen that includes KYPROLIS. And early indications are showing that this is presenting well as KYPROLIS share up new relapsed or effective patients continues to improve. XGEVA grew 4% year-over-year driven by a combination of volume growth, changes in the inventory and net selling price. We are pleased to begin the year with the FDA’s approval to expanding XGEVA label to include the prevention of skeletal related events in patients with multiple myeloma. This approval was nearly a month ahead of the producer date and within five days of approval the first multiple myeloma patient received an injection of XGEVA. A large portion over 100,000 multiple myeloma patients in the U.S. are at risk for bone complications. XGEVA can help these patients as many of them cannot be effectively be treated with zoledronic acid due to renal insufficiency. CMS has recognized this issue and has designated XGEVA as a novel therapy for these patients. This is another example of our lifecycle management strategy and investment in volume driven growth. Neulasta sales were flat year-over-year as we continue to see low single-digit decline in the use of myelosuppressive chemotherapy regimens due to growth in new and less toxic therapies. Onpro continues to gain traction and we exited 2017 slightly above 60% of the U.S. Neulasta units sold. Its compelling value proposition for patients and the healthcare system is clear. It delivers better adherence to therapy, lower rates of febrile neutropenia and hospitalization and more convenience for patients and oncology practices. Our patent protected Onpro will be an important point of differentiation in the marketplace against future potential competition. On the topic of potential new competition during the last year in the U.S., we know there continue to be a serious amount of questions about where the competitors will be announcing their arrival in the market for some years now. We will be able to succeed with regulators and in the courts such as they could finally come to market in the second half of 2018. If they do arrive we will be ready for them. With Neupogen, the impact of short-acting biosimilars in the fourth quarter were consistent with prior trends as we exited 2017 with maybe 40% unit share on the short-acting market. We continue to maintain pricing discipline since the entry of competitors. Now turning to Enbrel which declined 13% year-over-year, underlying volume demand was in line with prescription trends in the fourth quarter. Second, growth in rheumatology and dermatology as well as changes in Enbrel’s volume share across each segment was in line with prior quarters. As I told you last quarter maintaining Enbrel’s strong forming position and patient access is resulting in a small decline in net selling price. We expect the fourth quarter trends for both unit demand and net selling price to continue into 2018. You will also recall the first quarter last year was the lowest quarter of 2017 as insurance re-verifications and patient deductibles reset for the new calendar year. We expect to experience similar dynamics this year and therefore expect Enbrel’s first quarter to be the lowest sales for 2018, representing approximately 20% of full year 2018 sales. Critical to our strategy of Enbrel is the ongoing pursuit of innovative ways to enhance patient experience and to differentiate our product. The Enbrel Mini with AutoTouch was recently launched along with a new low-paying formulation. This is a multiuse device, specifically designed to be used with ease by rheumatoid arthritis patients. Patient feedback has been very positive on these new innovations and we are also very proud of the positive environmental benefits of this reusable auto injector. Switching now out to our ESA portfolio, Slide 21 shows the 2017 composition of our ESA business. Aranesp declined by about 7% on a year-over-year basis with lower unit demand, favorable prior year adjustments and unfavorable foreign exchange rates. With EPOGEN the underlying business remained relatively stable with the primary driver being lower net selling price as a result of our extended supply agreement with DaVita until 2022. Over the last couple of years we have grown our U.S. Aranesp business by converting the medium size and independent dialysis centers from EPOGEN to Aranesp. As of we are aware that our long-acting competitor has recently extended their product offering to these dialysis customers, so we expect to lose some of this business as early as this quarter. We are also preparing to compete for their potential short-acting biosimilar in all customer segments including hospitals and clinics if and when such a biosimilar is approved by the FDA. Our long track record of safety, efficacy and reliable safety, supplier and reliable supply is a competitive advantage that Amgen has always had. Turning now to cosmetics, beginning with Parsabiv, we continue to launch Parsabiv in new markets throughout the world. This includes launching in the U.S. last month. As the head-to-head clinical data showed Parsabiv demonstrated a greater level of efficacy when compared to Sensipar. Since the products has administered in the patient’s existing IV line during dialysis it was controlled into the hands of the healthcare provider which could drive an improved level of adherence. Nephrologists continue to be positive and are excited about having the product available. As David mentioned, the 2018 outlook for Sensipar is somewhat uncertain given the ongoing litigations. It is of course conceivable that competitors maybe able to bring generic products to market at some point in 2018 although we believe we have strong litigation positions. With Repatha we continued to execute competitively maintaining our majority share on a global basis. We are very excited to exit 2017 with the expedited approval by the FDA of Repatha outcomes data. This is very important milestone for Repatha and its potential to help cardiovascular patients at high risk of heart attacks and strokes. Our team can now for the first time speak directly to the benefits of treating patients with the Repatha and its ability to reduce the risk of heart attack by 27% and stroke by 21%, as well as further event reductions after the first year of treatment. Our sales teams were trained are in the field shortly after the approval and are receiving positive feedback from physicians. It’s still early days since the approval, but signs are pointing in the right direction with NBRX guidance. We do however expect quarter one sales to be relatively flat sequentially as Repatha faces similar dynamics as Enbrel related to insurance reverification and resetting of patient out of pocket costs in the first quarter. We continue to work payers to improve patient access and are making progress. Our priority remains reaching the large population of high risk cardiovascular patients. The cost to society of not treating these presentations is unacceptable. And we are looking at all options to improve access for appropriate high risk patients. We also look forward to having the Repatha labels updated with the outcomes data outside the U.S. soon. So 2018 will be an important year as we continue transition of our portfolio and lay the groundwork for sustainable volume driven long-term growth. In closing, I would like to thank our team for their impressive and competitive execution in 2017. I look forward to facing with them the challenges and more importantly the opportunities. In 2018 we are bringing our innovative medicines to previously healed patients around the world. And I will pass it to Sean. Sean?

Thanks Tony. Good afternoon. I will begin with cardiovascular, with the recent inclusion of our cardiovascular outcomes data in U.S. label Repatha is the first and only PCSK9 inhibitor approved to prevent heart attacks, stroke and coronary revascularization in adults with established cardiovascular disease. We now have numerous professional guidelines and treatment pathways along with the FDA all recognizing the ability of Repatha to reduce life changing events from stroke and heart attack. And we expect payers to take an increasingly more thoughtful approach to patient access. In inflammation, we began dosing Tezepelumab in our 52-week Phase 3 study in over 1,000 patients with severe uncontrolled asthma in our collaboration with AstraZeneca. I would note that the primary endpoint in our Phase 3 program is the same as the one we reported for the Phase 2b study where we demonstrated efficacy across a broad spectrum of patient types. We have also reacquired our IL15 antagonist antibody AMG 714 after our cell immune collaboration generated intriguing Phase 2a data in severe celiac disease. We will be discussing the data and potential path forward with regulators are they are not clearly established endpoints for registration in this area. In neuroscience we and Novartis are looking forward to the FDA PDUFA date for Aimovig in May. I am often asked about our approach with the CGR receptor antibody versus the ligand and how it differentiates. We targeted the receptor because we wanted the most potent antibody we could develop to reduce the amount of antibody required for maximal clinical effect. And our expertise in antibody discovery and development allowed us to succeed at this. With Aimovig we can elicit maximal CGRP inhibition with a relatively low doubts we have submitted 70 milligram and 140 milligram per month to regulators compared with higher doses with the ligand sequestrants. This translates into monthly subcutaneous self-administration with the pen type auto injector that uniquely does not require loading doses which we believe will be much more attractive the patients and providers. Also as we have seen in other diseases having mechanistic choices is an attractive option for physicians and patients. And Aimovig is the first and only CGRP receptor antibody ever introduced to the clinic. We have also executed a differentiated development program with Aimovig with a dedicated cardiovascular treadmill study in patients with stable angina and most recently demonstrated efficacy in a large study of patients with multiple prophylactic treatment failures who are not only considered difficult to treat, but also have virtually no other treatment options. Turning to oncology and KYPROLIS, the U.S. prescribing information was recently updated with the overall survival data from endeavor which also received a positive opinion in Europe. The ASPIRE overall survival data have also been submitted in both regions. Having survival data from two studies established KYPROLIS as the new standard of care for relapsed multiple myeloma. XGEVA was recently approved for the prevention of skeletal related events in multiple myeloma for patients in the U.S. As Tony mentioned, this is an important advance as myeloma patients often develop renal insufficiency, which hinders treatment with bisphosphonates putting them at increased risk for bone complications. XGEVA is not cleared through the kidneys and provides an important new treatment option. We also received the results of the Phase 3D care study, with XGEVA. D-CARE was initiated in 2010. With the hypothesis, the treatment with denosumab could potentially delay cancer recurrence in bone or other tissues in patients with early-stage breast cancer. D-CARE explored an investigational dosing schedule of denosumab as adjuvant treatment for women in high-risk early breast cancer stages receiving standard of care neoadjuvant or adjuvant cancer therapy. Unfortunately, the trial was neutral and did not meet its primary endpoint of bone metastasis free survival. Adverse events observed in patients treated with XGEVA were similar to the known safety profile. Detailed results will be submitted to the future medical conference and/or publication. I’d like to stress this result has no bearing on the approved and well-established indication for the prevention of skeletal-related events in breast cancer patients with bone metastases. Finally, in other European regulatory news, Nplate received a positive opinion in Europe recommending approval for the treatment of chronic ITP for patients 1 year of age or older were refractory to other treatments and BLINCYTO received a CHMP positive opinion to include overall survival data from the Phase 3 TOWER trial supporting conversion from conditional to full market authorization in the current indication. We had the opportunity to provide a detailed update on our oncology franchise and our excitement around our differentiated approach to immunooncology at the American Society of Hematology Meeting in December. There we announced that we developed a half-life extended BiTE format and had moved three of these into the clinic, with several others in preclinical development. We now have 7 BiTE programs in the clinic and expect data generated in the next 18 to 24 months in both hematologic and solid tumors to provide key insights on the clinical utility of this platform. We are in the unique position to evaluate both BiTE and CAR-T programs, in some cases, directed against the same antigen and in fact we have an IND in place for our first CAR-T from the Gilead, Kite collaboration. We will begin dosing patients a bit later this year. We also highlighted our commitment to multiple myeloma specifically with our MCL-1 and 2 inhibitor; 2 BCMA targeted BiTEs and a BCMA antibody drug conjugate all moving through Phase 1 and our bi-specific T-cell engaging antibody directed against CD38 licensed from Zencor, which will begin dosing this year as well. In our bone franchise, UCB recently submitted EVENITY in Europe for the treatment of osteoporosis in postmenopausal women and in men at increased risk of fracture. We continue to systematically reevaluate all registrational clinical trial data to ensure we have the most comprehensive understanding of the cardiovascular safety signal observed in the active-comparator ARCH study. And we will work in close collaboration with the FDA toward our resubmission under the complete response letter timelines in the U.S. later this year. Lastly, we continue to make good progress on our biosimilars with the European approval of our biosimilar, Avastin. We also expect Phase 3 rheumatoid arthritis data from ABP 710, our biosimilar REMICADE later in the year. In closing, I would like to thank all of my colleges at Amgen for another year of successfully advancing programs for the benefit of patients. Bob?

Okay, thanks. Skinner, let’s go straight to the questions and could you please remind our callers of the procedure for asking questions and let me just give them a heads up that will go longer than usual because advertising at the beginning of my remarks we were going to be little bit longer in our prepared portion. So, we will stay and take the questions from the analysts. Skinner, let’s jump to it.

Absolutely. [Operator Instructions] And our first question comes from Robyn Karnauskas from Citigroup.

Hi, guys. Thanks for taking my questions. So, can you really be clear about what percentage of your write-ins was influenced by biosimilars to what looks a real impact? And for Sean, when you think about your pipeline which is really broad and [indiscernible] all the options that are available? And now, when you think about the probably adjusted value in the pipeline, can you help us understand how to value that pipeline to offset the biosimilar impact? Thanks.

Okay, Robyn, we are having a little bit difficulty hearing you, but I think your first question was unlike was one that we should ask David to address, I think you were asking how much of the wide range in revenue guidance was attributable to biosimilar. So, I think David try to make it clear that a lot of it was related to Sensipar, but we are going to have David to address that.

Yes, right. So, if you look at the guidance that we offered it’s obviously much larger than we would typically have about double what we would have at the beginning of the year. And certainly, a large portion of that is attributable to the uncertainty around the launch, the competitive launches that may occur this year from Sensipar. So, that’s the primary driver of the broader guidance than we typically would offer.

And again, Robyn, it wasn’t clear what you are trying to get at with your question was the pipeline, but Sean go ahead.

Yes. I mean, I think it had to do with the value of the pipeline versus obviously the pressures we are facing on some of our legacy products as they go through the portfolio transition. I would just say that you are right, Robyn, we do have a very broad and deep capability these days. It’s the best it’s ever been at Amgen in my opinion. And I think that what you can observe is that across the key therapeutic areas that we are focusing in, we have a lot of really exciting opportunities. And I think that we can expect to see the same sort of productivity with respect to advancing the pipeline over the next 5 years that we have observed over the last 5 years.

Okay, let’s go to the next question.

Our next question comes from Chris Raymond from Piper Jaffray.

Thanks for taking the question. So, I have a question that I think it mostly related to Enbrel, there has been some dust kicked up recently with regard to payers in PBMs instituting some so-called co-pay accumulators, which don’t allow co-pay assistance and other patient assistance to count against deductibles and out-of-pocket maximums. From what I have read you guys have seemed to taking a really strong stance against this with some specific countermeasures and you are working to ensure that patient support actually benefits the patient. But I am just hoping if you could maybe put some brackets around the ranges of uptake that this phenomenon could have this year. And what other specific countermeasures you could take if your current measures don’t work? Thanks.

It’s Tony. So, let me respond to that one. You are correct that Amgen has made it pretty clear that we disagree with the concept of the accumulator. That fundamentally, our systems is, a, to assist patients who can’t afford their co-pays that the agreements and contracts we have with these organizations is around making sure if patients get access. So, we put that in writing and made it clear to people. As I look at quarter one, I see a minimal impact to our Enbrel business because of these programs.

And our next question comes from Geoffrey Porges from Leerink Partners.

Thank you very much for your question and for all the color in the presentation. Perhaps, David, could you comment a little bit on your balance sheet, you sort of alluded to the fact that there maybe some moving thoughts in your balance sheet and obviously you are bringing a lot of cash back. You are effectively un-levered despite the fact that you have significant debt given your cash position. As you look at opportunities across the industry, Bob, has been sort of quiet outspoken about the need for consolidation. And just wondering what kind of leverage would you be comfortable with given the visibility you have for the future cash flow. Would you be willing to sort of go up on a net basis to several times your EBITDA?

Yes, Geoff. So, I guess the way I would think about the balance sheet going forward is I would look at how we have managed the balance sheet over these last several years. And we did that to optimize and get the lowest weighted average cost of capital and we did that without consideration of the offshore cash balances. So, we set our leverage and it’s varied over the last several years out of peak after Onyx and then it’s come down since that time. And I think it would be fair to assume that on a steady state basis, we would think about those kinds of balance sheet leverage ratios to be similar to what we have had in the past. Now, what I would say is that in the very near-term given the fact that we have such a large amount of capital that we will be deploying, it’s quite possible as I mentioned in my comments, but we would pay some debt in the interim, but that wouldn’t be mistaken to be where we think the ideal capital structure would be. So, I would refer again without reference to the cash we have been carrying, but just look at our leverage over these last several years, I think it’s a good sort of guidepost for how we will manage the business going forward.

Our next question comes from Ying Huang from Bank of America/Merrill Lynch.

Hi, thanks for taking my questions. Just a question for David, can you comment whether the guided 14% to 15% tax rate for 2018 is actually also the way we should think about a long-term tax rate? And then in 4Q ‘17 your OpEx went a bit higher than usual, do you expect the margin, the pre-tax operating margin to go back to the level you saw in the first three quarters in 2017 for the 2018 period? Thank you.

Yes, sure. So, in terms of the tax rate post-2018, what I would say is that if you look at our guide for this year on a non-GAAP basis at 14% to 15%, our preliminary analysis would suggest to us that, that would be a reasonable outlook for the period post 2018 and I use some words preliminary and that sort of thing, because it’s still evolving, but I think as a starting point, I think it’s reasonable to think about that as a steady state type level of tax rate going forward. And then in terms of you are correct as I tried to articulate if you look at our operating expense performance in Q4, basically we typically have as you know, we typically have the highest level of expense is in Q4 on an annual basis. And to the extent, we had expenses beyond that this past year in Q4 of ‘17 those were basically an entirely one-time type expenses that we wouldn’t expect to be recurring and that was related as I said to the hurricane costs, which are extraordinary and one-time as well as based on the fact that we had last year 35% tax rate versus taxes this year at 21% in the U.S. We looked at choices we might make around the timing of such discretionary expenses and time them into the period where we got to benefit from a tax perspective. So, with all of that, you go to 2018 as I said, our guidance would suggest to you until us that we expect to operate in the 52% to 54% range again this year. And I think you can expect the quarter-by-quarter patterns of margins and expenses to be quite consistent with what you have seen if you look at an average over the last several years.

Our next question comes from Matthew Harrison from Morgan Stanley.

Great. Thanks for taking the question. David, I was hoping you could just help us breakout some items for 2018 guidance, particularly since you have got a couple of moving pieces in terms of the bottom line here if you could help us think about the impact that the tax rate had the impact of the buyback versus the underlying performance of the business? Thanks.

Yes. So, I guess what I would say is that if you – well, first of all, I think the tax calculation is pretty straightforward in terms of take the 14% to 15% range and apply it to what would be pre-tax profit. I think I gave you a range in terms of both operating margin and what we expected below the line interest expense and income to be. So, I think that hopefully will get you to a pre-tax income that you can apply the tax rate against. And then in terms of the repurchase activity, we now have authorization in total of little more than $14 billion for repurchases. And as I said, we could see that deployed as soon as you know completion in the first half. Our guidance of course takes into consideration that if there is some range of timing possibilities that our guidance covers in terms of the repurchase effects. So, again I think you can apply some math to get to the share count and how that would impact your EPS. Then it’s included in the guidance.

Our next question comes from Terence Flynn from Goldman Sachs.

Hi. Thanks for taking the question. Maybe just a follow-up to Jeff’s earlier question, Bob during your prepared remarks you mentioned you are well-positioned to capitalize on consolidation opportunities for your shareholders, just wondering if you would consider larger scale mergers or is that primarily built on similar to your prior history is Onyx is a recent example? Thanks.

Well, I said two things Terence. I said we are well-positioned to address ongoing changes in healthcare environment. And we expect there will continue the ongoing pressure from the healthcare environment and that we were also well-positioned to capitalize on consolidation for the benefit of our shareholders. So we have been consistent for some time in saying that that we have the financial capacity and we are interested in looking for deals that we think we can add value to in our areas of focus, so we are going to continue to do that. And as the other question implied we have felt for some time that there are pockets of excess capacity in the industry and we will look to see whether we can help create some value by being part of the consolidation around those.

Our next question comes from Michael Yee from Jefferies.

Thanks. Good afternoon. Thanks for the question. When I think about your 2018 guidance, I am sure that people are trying to get the details of that, but I am certainly trying to think that there is more uncertainties about beyond 2018, back in 2014 you gave a long-term strategic outlook and we delivered on that. But I think people are kind of worried about beyond 2018, what are the factors that you need to get through Bob or Dave to think about longer term guidance or maybe there is no need for longer term guidance, what are you thinking about? Thanks.

We will both take a shot at your question Mike. I think you are right, we felt there was a big disconnect in 2014. And we were confident about the long-term outlook. And we seem to be at a different place from our shareholders. So we found it’s helpful to try and address that disconnect with longer term guidance. And we are – as we said, I think each of us said we are confident about the long-term outlook for our business now and excited about what we see as long-term growth potential of the company. But we continue to talk to our shareholders and get, take their counsel about the benefit of thinking about the guidance question.

Our next question comes from Ronny Gal from Bernstein.

Good evening and thank you to my questions. Just a quick clarification for Tony and then a question for Sean, Tony you mentioned that you are not seeing impact from the copay accelerator. My understanding of that, you will not expect to see one until late in the second quarter when patient begin to hit the maximum out-of-pocket costs. Do I have this wrong or is there something that we should see earlier in the year? And then for Sean on the BCMA program, obviously you guys are putting some resources against it, how good does those by specifics have to be for you just taking forward in comparison to what we are always seeing from a CAR T program since 50% or 70% or maybe just give us the parameters you are looking forward to see if the products are good enough?

So Ronny, to answer your first part of your question, this is Tony, the accumulator programs would of course depend on what the individual patient’s deductible is. And as I said we are seeing and predicting minimal impact in the first quarter. And by definition I would therefore see minimal impact in the second as well by Amgen.

Yes. With respect to our BCMA BiTE programs, I think our view is that it’s going to be important for us to be able to demonstrate data. And these comparisons can be very complex, you know that the patient populations and the pretreatment of patients and things of this sort in the CAR T studies is often very different than this populations that we generate in our data set. So comparisons can be hard. But the bottom line is everyone that that we talk to in this field believes that if you can take a product like a BiTE off the shelf administers and get a similar degree of efficacy with potentially less of the safety risk and the enormous cost that can be associated with those safety risks in the hospital that BiTE would be a preferred modality. As I have said many times, I think there is a role for both of these modalities in the spectrum of care for even an individual patient in an oncology center.

And our next question comes from Umer Raffat from Evercore ISI.

Hi. Thanks so much for taking my questions. I wanted to ask three if I may, one on court decisions on from PCSK9 antibody patents that we thought last year, do you think they have any read across to the upcoming Enbrel district court litigation. Second on Sensipar and it seems like it’s a big swing factor in your 2018 guidance, my question is this, there was an IPR on one of your 2026 patents which was never instituted, so in that context, the question I have is how the generic entry possible or is that another way, are you aware of a non-infringing formulation. And then finally just a quick one, how much CGRP in your 2018 guidance? Thank you.

So where is the third question, we are trying to track you there.

CGRP in the 2018 guidance.

Okay. Umer, obviously we have ongoing litigation, I don’t think it’s appropriate to comment on your sensible question. I wouldn’t try to read across – I wouldn’t try to do the meta-analysis in intellectual property land across the two trials that you referenced. David do you want…?

We are obviously not going to give individual product guidance Umer at this point. We are excited about the product. We are excited about being first, so some dramatic population and the interest in having a new therapy that makes a big difference is high, but we are not going to give you individual product launch guidance at this point.

Okay.

Yes. Now let’s take the next question and maybe you can just remind our audience as to limit themselves to one question, since we are running over way over today.

Yes. Please limit yourselves to one question, ladies and gentlemen. And our next question does come from Geoffrey Meacham from Barclays.

Good afternoon guys. Thanks for the question. Bob, when you think about deals, how much of a priority is a return to top line growth versus just managing cash flow? And then very related, have you guys have explored – ever explored a split or some sort of segmentation of the business, just to separate the mature franchises from the early cycle products and pipeline? Thanks.

Okay. Geoff, our focus when we look at deals is on we are looking to deploy capital that we think we can only return for our shareholders from, so it’s very easy to find accretive deals, it’s very hard to find deals that are both accretive and add to the long-term return on capital for our shareholders. So we are going to continue to be disciplined. We know the six areas that we are interested in. And with respect your second question, again I think you know our track record in this regard. We have been very active and very focused on looking at all ways to create value for our shareholders and we will continue to do that.

And our next question comes from Eric Schmidt from Cowen and Company.

Okay. Just a question for Tony on Repatha, is I am doing the math right on Slide 23 would be the volume and sales gains that you had, it looks like there was a net 15% quarter-on-quarter decline in Repatha’s price, is that true and maybe you can provide some color what’s going on there? Thank you.

Yes. I actually couldn’t give you the details with that one right now. There was going to be a change in net price, but I don’t think that it was that high. We can come back to you guys and give you the details on that. I don’t have them with me.

Our next question comes from Alethea Young from Credit Suisse.

Great. Thanks for taking my question. One for Sean, are there additional Phase 2 programs would you consider for Tezepelumab, maybe anything in allergies or anything like that things?

Yes. Right now, I think the things we are kind of excited about in Phase 2 are AMG301 in migraine, which is we are in a strong leading position with that mechanism and hope to see that it will be either synergistic with CGRP or address patients that don’t respond to CGRP innovation. And we have also the aisle to new team program AMG592, I would highlight as a program that is moving into multiple Phase 2 autoimmune disorders. And that’s a mechanism as you may know where we are able to affect the population of Treg cells in a profound way with this engineered form of IL-2. The number of our BiTE programs are while they are in Phase 1 that the next study for them could in fact like it was for BLINCYTO, be registration enabling. So this Phase 1, 2, 3 line gets pretty blurred in the oncology area particularly. So I consider a lot of the molecules that are in the clinic including our MCL1 inhibitor to be potentially in a pre-registration study as the next study type of status.

And our next question comes from Cory Kasimov from JPMorgan.

Hey, good afternoon guys. Thanks for taking the question. Mine is on Repatha and I recognized it’s really recent, but I missed it a little more color. On the early feedbacks you are getting from the field on the drug post the inclusion of CBOT in the label and really more importantly how much of a difference you expect the label to make given that you guys make it sound like it’s still the payer access issue and payers have been aware of this data for a longer period of time? Thanks.

So, Tony here. Let me respond to that one, right. So, as I have said a couple of times, since launch, we have been able to talk to physicians about the product being able to lower LDL from a promotional perspective, which is probably 98% of our physicians who don’t attend large congresses, we have not been able to be in a position to talk about the real benefit of Repatha dramatically lowering LDL and thereby reducing the risk out of heart attack and stroke. Just to give you an idea of how fast this has moved, we got the approval on the Friday at about 11:35 a.m. By Tuesday, we had trained our entire team of managers on actual promotional material. By the Thursday, we trained the entire sales force. By Saturday, we trained 250 cardiologists, speakers and by the next week, they had completed just over 200 speaker programs with an average of about 15 people attending each speaker program. I have never seen such rapid uptake of a speaker program from an exit – and these are promotional speaker programs, where the cardiologists are talking specifically from the new label. The feedback from sales force to-date has been very positive, people not truly understanding the value of what the drug does. And when I look at the last two weeks average NBRxs, they are about 18%, 20% higher than the average of the 4 weeks for December. So, yes, it’s tough to read this early on, but we are seeing an uptick in new patients getting to getting approved. When I look at our payer or access environment, I see the commercial plans sort of January of 2017, are improving – have improved by about 8% in terms of the approvals. Our Part D coverage has improved by about 30%. So, we continue to work hard to make sure people understand the value of this drug. I think more and more cardiologists and physicians are putting forward appropriate patients and fighting for them to get on the drug.

And our next question comes from Salim Syed from Mizuho Securities.

Yes, hi. Thanks guys for taking my question. I just had one on Repatha. So, Eugene Braunwald spoke recently at The Medicines Company Investor Day and spoke specifically regarding primary prevention with inclisiran. I was curious what your thoughts were on that and if there is any impact to Repatha as it relates to that. And specifically also do you think inclisiran can be inserted between a statin and Repatha? Thank you.

Yes, hi, this is Sean. I will try to respond. I think obviously the kinds of populations that can be addressed with these agents are identical to the kind of populations that have been treated with statins over the years, we focused on a very high risk secondary prevention type population, although our label in both the U.S. and Europe is broader than that. And I think that it’s perfectly reasonable to study high-risk primary prevention patients. However, when you look at the situation we faced right now where it’s so difficult to get these drugs to patients who have experienced multiple events and have very high levels of LDL. I am not sure that’s the direction strategically that I would go if I were going to do another OUTCOMES trial, but it’s a reasonable thing to do. In terms of sequencing these therapies, if that all depends on the effect size that can be achieved, the safety profile of the novel mechanism of platform technology like siRNA in a very broad population. The bar is extremely high obviously from an efficacy safety perspective with Repatha.

And our next question comes from Ian Somaiya from BMO Capital Markets.

Thank you for taking my question. I had another one on Repatha. You have previously commented on maybe willingness to speak with payers or negotiated with payers on rebates and pricing once CVOT was in the label, I guess we have gotten to that point. And then separately once the guidelines reflected the recommendations, I am just curious where are we from a price rebate negotiation standpoint, how much room is there for us to see changes in sort of the pricing structure of the PCSK9 going forward?

So, it’s Tony. So as we have talked last year, we are in constant debate and discussion with payers and providers around the value of this drug, about the value-based pricing we have and the rebates that are being offered in the marketplace to ensure improved levels of access. So, we continue to work with the payers on an ongoing basis to ensure we get a good position on formulary that we have improved on the utilization management criteria with fundamentally just about every plan has improved on that one. Quite dramatically, we have with worked hard to ensure that we can assist patients where appropriate with co-pays that they are not able to afford or deductibles and unable to afford. And I don’t think that work is going to stop for a while as we go forward.

Next question comes from Andrew Peters from Deutsche Bank Equity Research.

Hi, thanks for taking my questions. So, I guess maybe to just switch gears a bit on a slightly different topic on the next-gen manufacturing side, just wanted to see how and if this new technology could potentially impact margins? And then more broadly as you talk about kind of the made by Amgen stamp for the biosimilar franchise, as you think about biosimilar production in general, how do you think Amgen is differentiated and from a margin perspective as you think about biosimilars, is that something that can fit into your pricing strategy on a competitive basis as well? Thank you.

We take this in two parts. David and I can respond to your question, Andrew. First, with respect to next-generation manufacturing, we have been talking about this as you know for some time. We are delighted – and we are excited that global regulators have approved our first of these facilities in Singapore. And when we committed to that first again talking about some years ago we were clear that both as a consequence of lower capital cost and the meaningfully lower operating costs we would expect over time a benefit to be reflected across the sales line and that will happen. And generally we have said and we still believe that manufacturing is a source of competitive advantage at Amgen. We have a track record of supplying every patient every time and we think when it comes in particular to biosimilars, the reliability of the safe supply and reliable supply of biosimilar medicines from Amgen will be a differentiator.

Yes, I guess I would add when we set out on the journey to get to our current margin structure we talked about a number of things that were contributing to us achieving that and certainly as Bob just talked about the first module of this next-gen manufacturing is now going to be helping us and this next module will continue to enable us to drive our competitiveness. I would caution against thinking that you should think there is a big step up from where we are operating right now, because I think we are operating in a very nice place in terms of our own competitiveness. And so think about driving continued cost down to enable us to then continue and increase our investments in particular in support of these new products that are going after very large patient population. So, we are thinking about continuously driving our cost base to allow us to invest heavily in support of growth for the business.

Skinner, as it’s nearing 6:30 on the East Coast, let’s take two more questions, please.

Absolutely. Our next question comes from Carter Gould from UBS Equities.

Good evening, guys. Thanks for the questions and squeezing me in. For Sean, follow-up in the earlier question given all the excitement, recently we have seen agents focused on inflammation go relatively broad in terms of indications that you are proceeding relatively narrowly despite central role in inflammation. Is that more because of the rest of your portfolio of assets, risk mitigation approach or should we expect the list of indications to expand?

Yes, it’s a good question. I mean, what I would say is that we believe that there is a particularly profound level of unmet need in asthma and for a agent that could be given to sort of all comers without having to parse patients by fairly complex criteria that are difficult to assess in the average clinicians office. So, I personally believe that that is an area of particular opportunity for biologic therapy like tezepelumab. I think that COPD, it represents another very substantial opportunity and because of the nature of this mechanism one could believe that it might be more likely to have efficacy in a setting like that. Then some of the other therapies that are directed more at the inflammatory cascades that downstream in asthma and there are other disease areas like atopic dermatitis that we continue to explore. And I am sure as with all of these products in the inflammation space once a product has a kind of an anchor core profitable indication, virtually every good idea and a variety if not so good ideas get explored by either companies or investigator-sponsored studies trying to find every possible nook and cranny where the product might work.

And our last question for the call comes from Kennen Mackay from RBC Capital Markets.

Hi, thanks for taking the question. One for Bob and David here. David, you mentioned there was now the balance sheet strength to really sort of grow the business and really supports some of that capital and Bob sort of building up what you mentioned surrounding a focus on transformative therapies like a moving micrometer like Aimovig, like Prolia, like Repatha, just wanted to get a perspective on what was out there that you really sort of view it as interesting? We have seen a lot of consolidation in the CAR T space, do you have some exposure there owning a couple of the Kite, now Gilead programs. Is there anything like in-gene therapy or gene editing or does that really not align with the positioning of sales and volume converging in the years ahead?

Yes, I guess, this is Meline. What I would comment on in terms of the opportunities out there we have been I think pretty clear that we are focused in particular on the six areas, where we have decided to establish a commercial presence. And so we tend to orient ourselves towards those opportunities and we are quite clear in the market that we want to see everything of any size that might be of interest to us across those areas and that Kennen maybe Sean would want to comment on technologies, but certainly….

Yes. No, I would just since you mentioned some of these emerging technology platforms like gene-editing for therapeutic purposes or gene therapy that the earlier these kind of things are, the more likely it is that we will look at them even if they aren’t in one of these six areas, because we felt there is a breakthrough opportunity emerging and we could bring to bear our scientific and manufacturing commercial capabilities and so on. We have shown that will move on those kind of things.

Alright. Well, I think Kennen, Sean and David did a good job answering the question, so rather than add to it, let me just again thank you all forbearance and call that went a little longer than usual from us. But just to wrap up, we are heading into 2018 as I think you can tell from our remarks. We are excited we think we are operating the business well. We have strong products. We have an attractive pipeline that’s advancing rapidly. Strategically, we think we are well-positioned and focused on delivering growth and value for our shareholders. So, we look forward to reconvening with all of you in April and see how we do through the first quarter. Thank you.

And I would just like to add my gratitude for your patience. We had a lot of topics to cover today of course between myself and my team we’ll be standing by for several hours. So, if you have any other questions, feel free to call us. Thanks again.

This does conclude today’s call. You may now disconnect. Thank you for your participation.