My name is Julianne, and I'll be your conference facilitator today for Amgen's Third Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer session at the conclusion of the last speaker's prepared remarks. [Operator Instructions] I would now like to introduce Justin Claeys, Vice President of Investor Relations. Mr. Claeys, you may now begin.

Thank you, Julianne. Good morning, and welcome to our third quarter 2023 earnings call. Bob Bradway will lead the call and be followed by a broader review of our performance by Murdo Gordon, Vikram Karnani, who joined Amgen from Horizon Therapeutics following the October 6, 2023 acquisition close, Dave Reese and Peter Griffith. Given the timing of these Horizon Therapeutics acquisition close, our third quarter results do not include any contribution from Horizon. Vikram will provide select information from Horizon's third quarter product sales for future context. You should have received a link to our slides that we have posted. Through the course of our discussion today, we will make some forward-looking statements and use non-GAAP financial measures to describe our performance. And just a reminder that actual results can vary materially. I would now like to turn the call over to Bob.

Okay. Thank you, Justin and thank all of you for joining our call. It's an exciting time here at Amgen. And we're continuing to execute well this year, serving many more patients around the world with medicines such as Repatha, EVENITY and Tezspire, advancing a number of promising first-in-class medicines rapidly through our pipeline and preparing for our next wave of biosimilar launches. However, as this is our first earnings call following the close of our acquisition of Horizon Therapeutics, I thought we might turn our attention there first. The Horizon acquisition, coupled with our purchase of ChemoCentryx, which we acquired a little more than a year ago, gives Amgen a significant rare disease business that fits squarely within our overall strategy and will be additive to the growth we expect from our base business. At the heart of our strategy of course is innovation. First, our best-in-class medicines that make a big difference for patients suffering from serious diseases. The medicines in our rare disease portfolio like Tavneos, Tepezza, KRYSTEXXA and UPLIZNA fit this description perfectly and they'll benefit from Amgen's decades of experience in inflammatory diseases. These medicines are also early enough in their lifecycles that we can positively impact their growth by leveraging Amgen's capabilities in process development, lifecycle management and manufacturing. Finally, we spent the past decade or so building out our international footprint with Amgen medicines now available in about 100 countries. And today our rare disease sales come almost exclusively from the U.S. So, we'll be able to leverage our global presence to quickly bring these medicines to patients around the world. You'll hear more in a minute from Vikram Karnani, who joined us through the Horizon acquisition and is leading a newly created rare disease business that is now the fourth leg of…

Thanks, Bob. I'm pleased with our performance in the third quarter. Execution is strong across the business with record quarterly sales for seven brands and robust volume growth across our general medicine, inflammation and hematology/oncology portfolios. Product sales increased 5% year-over-year. Volume growth was 11% with strength across our regions. U.S. volume growth was 11% and volume growth in our Europe, Latin America, Middle-East and Canada region was 8%. Consistent with our international expansion strategy, Asia-Pacific continues to be our fastest growing region with 27% volume growth in the quarter. Starting with our general medicine business, which includes Repatha, Prolia, Evenity and Aimovig. Overall revenue for these four products grew 21% year-over-year in the third quarter, driven by 20% volume growth. Repatha sales increased 31% year-over-year in the third quarter, with volume growth of 44%, partially offset by lower net selling price. In the U.S., volume growth of 45% was driven by a record number of new patients starting treatment, more than doubling year-over-year. We saw declining net selling prices in the US, primarily driven by new formulary coverage by CVS in July for commercial patients. Outside the U.S., we saw a 43% volume growth with strength across our regions. There are still many more patients around the world who can benefit from Repatha and we're rising to meet that challenge by investing and executing to drive awareness amongst physicians and patients. In the U.S., we have significantly expanded our primary care sales force and activated more than 15,000 new prescribers this year. We're also increasing promotion to patients through direct-to-consumer media efforts. Transitioning to bone health, Prolia sales grew 14% year-over-year in the third quarter, primarily driven by 7% volume growth and higher net selling price. We expect volumes for Prolia to grow supported by real-world evidence data presented…

Thanks, Murdo. We're excited to bring together Horizon's medicines, pipeline and rare disease expertise with Amgen's history of leadership in inflammatory diseases, global infrastructure and world-class biologic capabilities. For those that are not as familiar with Horizon's portfolio, I will spend the next few minutes providing some background on our rare disease medicines. Horizon's business delivered $945 million of sales in the third quarter, representing 2% year-over-year sales growth with multiple positive leading indicators. Let me describe in more detail. Tepezza, the first and only medicine approved for the treatment of thyroid eye disease, regardless of disease activity or duration, generated $453 million of sales in the third quarter, representing 2% quarter-over-quarter growth. We are confident that now as we have officially joined forces and have on-boarded the full commercial team, we will make significant progress in advancing this important product over time to patients. We are driving several initiatives to continue to build the U.S. thyroid eye disease market. In the third quarter, we saw a greater than 50% year-over-year increase in the number of Tepezza prescribers, supported by the April 2023 FDA label update to treat patients with thyroid eye disease, regardless of disease activity or duration. We are pleased with this progress and are continuing to educate the physician community on new clinical data and updated indication across the full spectrum of TED patients. Second, large national and regional payers are continuing to make favorable policy changes to help eligible patients access Tepezza. To date, we have obtained favorable policy changes for greater than 30% of U.S.-covered lives, which are expected to take effect later this year and early next year. As a reminder, for Tepezza, there is a time lag between a patient being identified for Tepezza treatment and treatment being initiated. It can take up…

Thank you, Vikram. Good morning, everyone. I'd like to begin by welcoming our new colleagues from Horizon. We are excited to be integrating Horizon's R&D capabilities with Amgen's to advance the promising Horizon pipeline. For R&D, the third quarter was one of high quality execution as we progressed our innovative pipeline with important oncology data readouts, the addition of two breakthrough therapy designations and completion of enrollment on key studies. We also advanced our innovative pipeline through rapid enrollment on multiple registration enabling studies. Starting with general medicine, we have completed enrollment in the Phase 2 study of maridebart cafraglutide in patients with obesity with or without diabetes. The goal of this study is to generate data that will provide optionality to design a broad Phase 3 program, leveraging the unique properties of maridebart cafraglutide that could potentially allow us to take a differentiated approach. We anticipate top-line data from this 52-week study towards the end of 2024. The Phase 3 outcomes study of Olpasiran are potentially best-in-class Lp(a) targeting small interfering RNA molecule in atherosclerotic cardiovascular disease is enrolling very well. In inflammation, beyond severe asthma, we are investigating additional indications with Tezspire, including separate Phase 3 studies in chronic rhinosinusitis with nasal polyps, which is fully enrolled and eosinophilic esophagitis. We also have a Phase 2 study in COPD that has been fully enrolled with top-line data anticipated in the first half of 2024. This study has recruited a broad population of COPD patients, including patients with both high and low eosinophil counts. Rocatinlimab, a first-in-class anti-OX40 monoclonal antibody being investigated in patients with moderate-to-severe atopic dermatitis, recruitment is off to a strong start on the ROCKET Phase 3 clinical development program. We have now randomized over 1,500 patients across the program. We are excited to present additional…

Thank you, Dave. I'll review our third quarter results before discussing our updated 2023 guidance. Turning to our third quarter financial results, which are shown on Slide 44, total revenues of $6.9 billion grew 4% year-over-year and non-GAAP earnings per share of $4.96 grew 6% year-over-year. The growth in revenues was due to product sales increasing 5% year-over-year, driven by a 11% volume growth. Third quarter total non-GAAP operating expenses increased 4% year-over-year. We advanced our pipeline and invested in growth opportunities in the quarter, while delivering a non-GAAP operating margin as a percent of product sales of 52%. Non-GAAP cost of sales as a percent of product sales increased 1.3 percentage points on a year-over-year basis to 17.4%, primarily driven by higher profit shares and changes in product mix. Non-GAAP R&D expenses in the quarter decreased 2% year-over-year due to lower spend in research and early pipeline activities, partially offset by higher spend in later-stage clinical programs and marketed products. Year-to-date, non-GAAP R&D expenses increased 5% due to higher spend in later-stage clinical programs and marketed products, partially offset by lower spend in research and early pipeline. Non-GAAP SG&A expenses in the third quarter increased 1% year-over-year. We continue to focus on prioritizing key investments, digitalization, driving productivity and accelerating use cases for artificial intelligence. Non-GAAP OI&E were a net $225 million expense in the third quarter. The year-over-year favorability was driven primarily by higher interest income and the change in Beijing accounting from equity method to a mark-to-market investments, with the impact included only in our GAAP results. Our third quarter non-GAAP tax rate increased 3.2 percentage points to 16.1%, primarily due to the 2022 Puerto Rico tax law change that replaced the excise tax with an income tax beginning in 2023. We continue to execute on our…

Thank you. [Operator Instructions] Our first question comes from Michael Yee from Jefferies. Please go ahead. Your line is open.

Hey, guys. Good morning. Thanks for all the details around the Horizon transaction. I just wanted to ask a question to David Reese. I mean, David unless we're hiding under a rock, I guess obesity is like the biggest thing ever now and wanted to understand your commentary and confidence around 133 and the profile around what you think that could be relative to leaders and how 786 would fit into that given such a high bar for other orals? Thank you.

Yeah. Sure. As we've discussed before, Mike, with 133, we believe we have a potentially differentiated product based on the mechanism of action, it's a bi-functional to remind everyone, that antagonizes GIPR based on a genetic evidence, largely compiled by us, with two GLP-1 peptides stapled to the molecule for that mechanism of action. As I noted in the remarks, we've rapidly enrolled the Phase 2 trial. There are multiple arms to this trial that explore three different doses as well as different dosing intervals that I think will give us broad optionality going forward. We were quite pleased with the Phase 1 data in terms of depth of response, the kinetics of response, as well as persistence, and these are the things that we will be looking at in Phase 2 as we go forward. So it's full steam ahead on this program. And we're looking forward to data from the Phase 2 trial next year which will really inform the breadth of the Phase 3 trial that we're contemplating, which could be quite large. In terms of AMG 186 -- or 786, this is an orthogonal mechanism of action. We're bringing in data. And as we've indicated, after, you know, the first half of next year or so, we anticipate presenting those data in determining the path forward. As you note, it's a high bar in this field and we'd have to see the sort of profile that would, give us the confidence to invest broadly in a molecule like that. I would also note, we've got a suite of preclinical molecules, many of them non-incretin based in terms of mechanisms of action that we will be bringing forward over the next few years. So this is an area where we expect it to be a long-term player. Thanks.

Thank you, Michael. Our next question comes from Yaron Werber from Cowen. Please go ahead. Your line is open.

Great. Thanks for taking my question. Peter, just for you, the $700 million run rate, that was interest expense only, right? That's not including where you're recording sort of the Beijing contribution in the line right above it in terms of other income. And then just secondly, again on your guidance, you also mentioned 3% to 10% increase year-over-year And you mentioned 5% to 10% going to R&D. The 3% to 10% increased -- just remind us what that was, because SG&A is expected to be down, right, slightly year-over-year, so I just missed what that was.

Right. Thank you, Yaron. The 700 is everything, so that's the full run rate. And on the question on R&D, as I said in my remarks, we've focused our spending on the later clinical and in-market portfolio that was slightly offset by some decreases in early research. But we continue to spend and invest in the business and we'll continue to do that. As you can see, we're fortunate to have a significant number of opportunities in Phase 3 in the later stages. So that's what we'll stay focused on, will continue to differentially invest in the opportunities in innovation and we're very excited about that.

Thank you, Yaron. Our next question comes from Terence Flynn from Morgan Stanley. Please go ahead. Your line is open.

Great. Thanks for taking the question. Maybe a two-parter from me for Peter as well. Peter, again, I know you went through a lot of numbers there at the end. But in terms of the revenue guidance raise for the year, can you just characterize if that was all coming from the Horizon portfolio or if there was any other contribution from the underlying base business? And then the second part of the question is just any directional help with how to think about 2024 tax rate, as I know there's a number of moving pieces from some legislation, but then you obviously have the Horizon deal close. So just directionally, can you help us out in 2024 tax rate? Thank you.

Yeah. So -- excuse me. On the tax rate, let me start with that '24 tax rate. We'll guide on that as we always do at the beginning of the year. I would just say, I think you're thinking about the global minimum tax and Pillar 2, and I would just note, there is no consensus or predictability about how that whole OECD framework is going to be implemented. I know different countries are doing different situations. Rest assured, we look at everything, optimize our position as appropriate on something like that. So we'll give you guidance on that next year at the beginning of the year. First part of the question?

Revenues.

Yeah. On revenue, look, we don't really break that down. I would just suggest that we continue to see strength in the business and we continue to see our in-line portfolio perform very, very well. I would just note, we had seven products with record sales in the quarter, we had Repatha up 31%, up in the quarter year-over-year. And we've continue to see the hematology-oncology portfolio was up 16%. So everything's, strong in our base business. We're excited about that base business, that continues to perform really well and we're very excited to have the rare disease business now. And looking forward to having that as, as we said, it's kind of the four stool of our commercial thrust forward. So we're seeing good strength around the business in different areas and we'll just continue to get more and more medicines to patients. I'd note, the 11% volume growth is really important. Underneath that 12% volume growth outside the United States. And underneath that 27% volume growth in JPAC, our fastest-growing region. So that's how we're looking at that. We're pleased with the momentum and we're pleased to be able to raise the 28.0 to 28.4.

Thank you, Terence. Our next question comes from Salveen Richter from Goldman Sachs. Please go ahead. Your line is open.

Good morning. Thanks for taking my question. With regard to the Horizon transaction, now that it's closed, could you just walk through the outlook for Tepezza and the other assets as we look to 2024 here? You talked about initiatives that you have to expand the patient population in ex-U.S. being a growth lever. Just maybe walk us through that and when we might get updated long-term guidance, including Horizon. Thank you.

Yeah. Maybe we'll take this in two parts, Salveen, it's Bob. Obviously, we're not going to provide '24 guidance here this morning. But we'll see whether we can give you a clear sense of the things that are exciting us when we look at those products for -- heading into next year. And just generally on the question of long-term guidance, as you've heard us say on a number of occasions, we remain confident that we're on track to meet or beat the objectives that we established for 2030, in some ways now frankly, we're more focused on what we can deliver through 2031 and soon to be 2032 as well. So we reviewed -- in-depth review of the oncology portfolio a couple of weeks ago and gave you a good sense for the moving pieces through the end of the decade. And we may seek to present a picture of the business in that way now heading into next year, so that you can get a more comprehensive deep-dive into the different segments of the business that are driving growth. But let's turn to first question, which is the outlook for Horizon and the initiatives that are underway, in particular, with respect to Tepezza, and KRYSTEXXA and UPLIZNA. So Vikram, why don't you fire away?

Yeah. Thanks for the question. I think as I said in my prepared remarks, we have a lot of positive leading indicators as we look at the business. I'll start with Tepezza. We're continuing to build that U.S. TED market following the FDA's April 2023 label updates. And that really helps us get the medicine to TED patients regardless of disease activity or duration. And what we've seen following that label update is that the payers are continuing to update their medical policies and make them more favorable so that more of these patients, more in the low CAS setting or the low Clinical Activity Score setting can now access Tepezza. And I think, finally, from an execution standpoint, we see newer prescribers from both ophthalmologists, as well as endocrinologists increasing 50% year-over-year in this third quarter. So all of these indicators for Tepezza are positive and we feel good about the execution of the team. And as I said, we have now combined forces with Amgen and together we should be able to drive business in a positive way moving forward. Think -- talking about -- the story around Tepezza also is one of international growth. While we see a lot of positive trends in the U.S., we're pretty excited about what we can do as a combined company for patients outside the U.S. as well. We've talked about Brazil getting approval recently. We've got [indiscernible] OPTIC-J as our trial in Japan. We've talked about the chronic trial that's enrolling. And finally, we're getting ready for other markets and we hope to bring the medicines to many more markets now as part of the combined company than we were talking about previously. So Tepezza, both signs very positive in the US as well as globally. And as we've talked about the results for KRYSTEXXA and UPLIZNA, both those medicines performed really, really well. We have immunomodulation with KRYSTEXXA being a major driver since the label update last year. That has continued to drive uptake since that time. We see that continuing into the future. And with UPLIZNA, it is the fastest-growing biologics in neuromyelitis optica spectrum disorders or NMOSD, and we see that momentum continue both in the U.S. as well as outside the U.S. So I think when I look at the overall portfolio we have, we're operating from a position of strength and now we can expand that even further with the combination with Amgen.

Thank you, Vikram.

Thank you, Salveen. Our next question comes from Jay Olson from Oppenheimer. Please go ahead. Your line is open.

Hey, congrats on all the progress on so many fronts. Could you talk about your investments in AI technology and how that may influence your drug discovery and development over the next five to 10 years? Thank you.

Sure. I'll ask Dave Reese to address that, Jay.

Yeah. Thanks, Jay. This is an area where we're very excited. You know, I'd like to characterize it as the hinge moment where we're seeing the coming together or the unification of technology and biotechnology. I really think this is going to affect over time a qualitative change in how we do drug discovery and drug development. So everything from protein structure prediction, protein-protein interaction, prediction at the molecular level, to multiomic analysis on extraordinarily large datasets which can -- which is only tractable through AI or machine learning, dense clinical trials data and then real-world evidence and real-world data. When you look across that spectrum, I believe we probably have the largest datasets in the industry. And so we are putting the tools in place and the foundation or models to really mine those data for deeper insights in the biology and then all the way out into the market. We'll talk about this more over time. But this is going to be an area of investment and it can be overhyped. It's not a panacea, but it is absolutely going to be the most powerful tool we've seen in a long, long time.

Thank you, Jay. Our next question comes from Umer Raffat from Evercore ISI. Please go ahead. Your line is open.

Hi, guys. Thanks for taking my question. Dave, I have a two-part question on AMG 786, the oral for obesity. First, I noticed you guys dropped a cohort in your SAD portion of the trial. Is that because you ran into MTD? And then also, I noticed the exclusion criteria around suicide ideation were intensified and I can't tell if we could be reading into that or not, would love to get any color. Thank you

Yeah. Thanks. On the latter, I wouldn't overthink that at all. I don't think there's anything there. In terms of the dosing that we do, this is always adjusted as we move through Phase 1 trials. As I've indicated, we're bringing in the data now, we're taking a look at that. And the constellation of clinical data -- updated preclinical data, and I think we'll have that all together as we go into next year and that will determine the potential path forward for AMG 786. And just to remind everyone, this is a target that is not an incretin-based target.

Thank you, Umar. Our next question comes from Robyn Karnauskas from Truist Securities. Please go ahead. Your line is open.

All right. Thanks for taking my question. I do have a follow-up to Salveen's question actually. So Tezspire has gotten a lot of market share, there is so much room to grow in the TED space. Can you walk me through, like how Amgen can actually help grow that business because I'm confused by whether it's the hearing loss or reimbursement or what are really the levers that will actually grow that company -- grow that business -- Tepezza, sorry, Tepezza, that I think that there's a lot of room to grow. And given your strength, you could probably make that work. So, how do you intend to do that?

Okay. Thank you, Robyn. So I think it's a two-part question there on Tepezza. We may tackle it in two parts with the combination of Vikram and Murdo. So go ahead, Vikram, why don't you start?

Yeah. Thanks for the question. Like I said earlier, the -- I think one of the areas that has -- something that happened this year was the FDA update. Now when the label updates to patients that are treated regardless of disease activity or duration, many of these patients, in fact, I would say more of these patients are being treated by prescribers, such as endocrinologists and ophthalmologists. And that's what the team has been focused on working through, making sure that our educational program is available to these physicians, so that we can widen our prescriber base from the original set of prescribers that started treating patients at launch. So it's really important to understand that expanding the prescriber base is a critical driver for that success going forward. And as we've seen new prescribers have increased 50% year-over-year. As we continue to work through these new -- this low CAS or low clinical activity patients, we also have to remember that when they are prescribed the medicine, payers need to open up access to the medicine. So our market access team has been working pretty diligently to make sure that payers continue to update their medical policies. And what we have seen is more than 30% of U.S. covered lives are now eligible patients that can access Tepezza with more open or more favorable policies. This has to continue and both of these are areas that we will continue to work on as we go into early next year and beyond. And maybe I'll turn it over to Murdo to add his comments as well.

Yes. Thanks, Vikram. Hi, Robyn. I would add, much the same way when we acquired ChemoCentryx and Tavneos, we realized that there was a low level of awareness of Tavneos. What we did there was we added reminder messaging to some of our broader rheumatology-covered sales forces to increase awareness of the data associated with Tavneos in ANCA-associated vasculitis patients. We've seen a corresponding increase in utilization, of course, driven by awareness of that product. So the core team is still promoting the attributes of the product and educating physicians, but there is a broader group of field personnel building general awareness of that product. What I think Vikram and I are talking about is the Amgen teams that cover endocrinologists were involved in the diagnosing and treatment of Thyroid Eye Disease, would be an ideal opportunity for us to broaden the awareness amongst that community of endocrinologists who are diagnosing and treating thyroid eye disease today to augment the great work that is happening with the rare disease teams under Vikram's leadership. So there's a number of things like that where we can scale and speed up the building of awareness, for example, of the new data that Vikram was just describing and the broadening of the label language. Vikram also mentioned the international expansion. The original plan was quite ambitious for Horizon. We've actually increased the number of markets that we intend to file and launch in, in a shorter period of time. So that would be an additional opportunity for growth given the strength of the two companies now combined.

Might just add also, Robyn, that in terms of the time course of events here, I think now that we flip back on a year of ownership of ChemoCentryx, we can really start to see the benefit of what Murdo just described kicking in, over the last few weeks and months. So it takes a little bit of while, but I think our confidence is that over that period of time, we've been able to find ways that we can add distinctive value to that product and we're hoping a similar thing will happen with respect to the new rare disease molecules that we brought on board. So it's not like walk in, flip a light switch and suddenly things are performing on a different track, but rather you come in, work together, identify the ways in which we can be additive in the marketplace. And I'm hopeful that we'll see during the course of '24, the momentum build for the combined organization on these products.

Thank you, Robyn. Our next question comes from David Risinger from Leerink Partners. Please go ahead. Your line is open.

Yes. Thanks very much. And so my question is on oral obesity development. Regarding Phase 1 candidate 786, management has consistently emphasized that it also has a suite of oral preclinical product. And so should we take away that we should be viewing 786 as more of a wild card, rather than something that Amgen has conviction in at this point? And when do you expect to be able to start Phase 1 for another oral preclinical candidate? Might that happen in '24 or not until '25? And then separately, just I wanted to squeeze in a quick financial question. Do you expect Horizon product channel inventory work down in the fourth quarter to significantly constrain reported net Horizon sales in the fourth quarter? Thank you.

Yeah. Thanks, David. Dave Reese, I'll start and then turn things over to Murdo, and Vikram. In terms of oral obesity molecule 786, as I've said, it has a novel mechanism of action, it's a Phase 1 molecule. So you should view it as a Phase 1 molecule. And we're bringing in the data I said, and we'll take a look at that as we get into the new year and make a determination on potential path forward for that molecule. I wouldn't view it as anything more or less than a Phase 1 asset with a novel mechanism of action. In terms of additional molecules and when we might file INDs and launch our first in human trials, we'll give guidance as that portfolio advances over time. Again, many of those molecules are targets that we emanated from deCODE Genetics, our colleagues in Iceland. And I'll provide further information as we get ready to move towards the clinic. But this is playing a long game. If you step back, look, this field is in its infancy. We are just beginning to understand the complex metabolic arrangements that occur with obesity and there are clearly different forms of obesity. There's a lot of work to do. And as I've indicated, our intent here is to play the long game given that this is one of the major public health challenges of the 21st Century. So let me now hand it over to Vikram and Murdo for additional commentary on your second question.

Yeah, David. I just want to make sure that I heard your question right, it was about inventory and product wind-down. Look, I don't think we are going to comment on that specific aspect. I think the -- our team remains focused on driving demand and working with physicians to educate them and expanding the use of Tepezza for appropriate patients and that's where we're really focused too as a primary driver of net sales growth.

Thank you, David. Our next question comes from Chris Raymond from Piper Sandler. Please go ahead. Your line is open.

Hey, thanks for taking the question. I just -- maybe a commercial question on your dermatology strategy and specifically on Otezla, just on the dynamic that you guys talked about with free competitor drug, presumably that's SOTYKTU scenario. And I think I heard you guys, you know, you've been calling this issue out for some time, but also with the investment that you're making in the dermatology sales force, I think I heard you say today that you're increasing that sales force sort of 20% or so. Is the implication that once the competitor free drug program runs its course, that Otezla volume should increase or what's your sense of what happens to volume? And maybe I'll ask it another way, if that volume increase doesn't materialize, do you need additional derm portfolio offerings to support that added effort? Thanks.

Thanks for the question, Chris. This is Murdo. So let's just recapitulate what's happening in this market. At the beginning of the year, you had a number of new launches, not just SOTYKTU, with novel topicals coming into the market as well as a novel oral and every one of those products had very generous free drug programs and that had two effects on Otezla. There were topical patients who would have normally moved to their first systemic option who tried the new topical treatments on a free drug basis. And at the same time, there was a launch of a new oral that had a very generous free drug program. And so, Otezla, which sources the majority of its growth from topical patients for systemic, in other words, biologic naive patients. Otezla got squeezed in the first and second quarter on the basis of those new programs coming into the market. What we've seen since those two events in the market is that the novel topicals have flattened out in their growth and have pulled back to some extent on their free drug offering. The other oral therapy SOTYKTU continues to provide free drug, and so continues to have some effect on Otezla. What we think will happen and we're already seeing the very early signals of this is that we will continue to source our new growth from the topical patients, bio-naive patients. Given that Otezla is the ideal for a systemic agent, we have established ourselves with really strong access in the market. So we don't need to provide free drug programs to the extent that everybody else is. And then as the contracting cycle for 2024 matures and we see what the actual access is for some of the other competitors in the market, including the…

[Technical Difficulty] Chris. Our next question comes from Mohit Bansal from Wells Fargo. Please go ahead. Your line is open.

Hey. Thank you very much for taking my question and thank you for changing the time to make sure people can enjoy Halloween. So maybe one question on sequential growth. If I look at second quarter from third quarter, it seems like pretty much every product, even including Nplate accounts for the government budget, seems to be down. I know that you warned about this in the second quarter call regarding Medicare donut hole, but can you talk a little bit about the dynamics there and how should we be thinking about this going forward?

Yeah, Mohit. I don't think every product is down. I think we had a number of products posting pretty significant double-digit growth in the quarter. And those are products that we continue to expect long-term growth from products like Repatha, EVENITY, Prolia, our hemo portfolio, BLINCYTO in particular. So, we're seeing some strength in our priority growth brands that we expect to continue to drive. What we did have in the quarter were a number of adjustments from prior period on net sales. So there was one particular adjustment on LUMAKRAS, which was based on a year-over-year change in the negotiations that we have on reimbursement. So in France, for example, we have an early temporary access program, and ATU program. Since 2021 LUMAKRAS has been available in France and we took a $22 million accrual in the quarter for those sales on the basis of price negotiations we are having in France. So we had a number of events like that related to price in the quarter. And as you mentioned, we are entering the donut hole for some of our products. So overall, I think unit volume growth is very strong. A few price effects on select products in the portfolio and a little bit of donut hole impact.

Thank you, Mohit. Our next question comes from Gregory Renza from RBC Capital Markets. Please go ahead your line is open.

Great. Good morning, Bob and team and congrats on the progress, and thanks for taking my question. Bob, just circling back to the obesity market again, and as you and the team focused on really being first or -- and/or best in class across markets, I'm just curious how you and the team view and anticipate how different the obesity market can look and how you see the unmet need morphing by the time a program from Amgen is ready for prime time. But would there be a need to look not just internally but externally to accelerate those efforts, especially if things are evolving so quickly? Thanks again and congrats on the progress.

Now, we're very excited about what we see so far emerging from our early work in obesity. I think over time you've got the sense of this from Dave Reese. This is likely to be a heterogeneous disease, they're probably going to be a number of different ways to have to go at it. But what encourages us right now is, what we think as an emerging differentiated profile for our approach versus the competition. And maybe, Murdo, you want to just jump in and remind Gregory about the basis of differentiation that we see so far in our data from the competition and why we think that gives us a good foothold for entering the markets.

Yeah. Thanks, Bob. I like the way the question was framed. It sometimes gets framed as, what are you going to do when the -- with these entrenched products in the market. And I'd just like [Technical Difficulty] people how young this market is and how much more is left to unfold. What we're seeing in the early days is, we're seeing a lot of patients trying these products, losing weight, but then not persisting with their treatment and regaining weight. So we think that there is an opportunity in the market long term for a product that can bring about very strong weight loss, both rapid and sustained over time with convenient dosing. And I think that that's where 133 or maridebart cafraglutide really has an opportunity to differentiate itself from what is available in the market today. We've seen the durability of that product between doses, and we think based on the Phase 2 in a number of different dosing cohorts we have being explored in that trial, we will be able to find the right balance of efficacy and the ability, based on convenient dosing to sustain that weight-loss over time. And, of course, the goal here is not just to lose weight, but to improve a number of sequelae or outcomes from people who carry extra weight over the course of their life, and that's what we're starting to see with others reading out in event trials. We will see more data as the medical congress has passed these next few months. But our hope is to bring about real improvement in outcomes with a highly efficacious and highly convenient product, like 133.

Thank you, Gregory. Our next question comes from Geoff Meacham from Bank of America. Please go ahead. Your line is open.

Good morning, guys. Thanks so much for the question. Murdo, it's been a long time coming for Repatha in submission. Are you guys finally hitting a commercial tipping point with payers, or do you think there is an increasing interest among cardiologists? I guess, I wasn't sure how, you know, the current market is and looking forward, how about the impact? How do you guys see it from a couple of the ongoing Phase 3s and 4s? Thank you.

Thanks for the question, Geoff. Yes, it's been a bit of a journey. And the COVID pandemic didn't help us in our efforts to educate and convince cardiologists that they needed to do more to be more aggressive in treating their patients; LDL, cholesterol. I do think we've reached a tipping point in cardiology and I do think we've reached a tipping point with payers. We now have over 90% commercial lives covered. We anticipate being able to continue to progress our Medicare Part-D coverage, and we're seeing, you know, the PCSK9 category driven primarily by our 80% share of that category. Really, really starting to move now. Our new patient volume growth is good, not just in the US, but around the world. We are now seeing more and more primary care physicians using PCSK9s in combination with other drugs to more aggressively lower LDL in high-risk ASCVD patients. So the phases are pretty clear, payer coverage established, affordability for patients established, cardiologists are now prescribing with frequency and now moving into primary care. And we'll be adding direct-to-consumer campaign investment to that mix. So, yeah, I think we've reached a tipping point on Repatha Geoff and I'm bullish on what we can do to further expand that product, both from a volume and net sales perspective.

Thank you, Geoff. Our next question comes from Chris Schott from JPMorgan. Please go ahead. Your line is open.

Great. Thanks so much for the question. Just a question on longer-term margins. So I guess post Horizon and I guess with the ramp of your pipeline, including some potentially very large obesity studies over time, I guess, just directionally, how should we be thinking about margins from here? I guess is this kind of 50% or slightly above 50% range a reasonable target for the company, or just any considerations we should keep in mind as we kind of balance, I guess, Horizon versus investment? Thank you

Well, we're not going to give updated margin guidance on this call, Chris, but I think we've been pretty clear about what the trail should look like. We're focused on remaining a leading efficient player in our industry. We've been able to achieve leading operating margins over time. There is nothing that we see in the Horizon business specifically that would lead us to conclude differently from that. So we expect that at a full run rate, capitalizing on our in-place infrastructure internationally and manufacturing and process development that the margins in that business would be attractive in our hands. And the reference that Peter made to R&D spend earlier, obviously, to the extent that we get into a number of Phase 3 trials in the middle years here of the decade for Lp(a) and for obesity products, that may have an effect on overall margins, but we'll have plenty of time to talk about that in advance so that nobody is surprised if the margin starts moving around. So again, we've demonstrated a pretty consistent ability to manage the cost structure of the business and that's something that we're determined to maintain.

Thank you, Chris. Our next question comes from Evan Seigerman from BMO. Please go ahead. Your line is open.

Hi, guys. Thank you so much for the color on the call today. So the growth in perspective is pretty impressive. Just wondering how the mentioned $1 billion run rate compares with your expectations going into the deal. And then taking a step back, we saw on a JAMA article about the use of type 2 diabetes and then for gout. How are you seeing that in the broader gout space? Is this something we should be concerned about when it comes to KRYSTEXXA? Thank you.

Maybe we'll take this in two-parts. First, with respect to KRYSTEXXA, I'd say KRYSTEXXA is performing very well and we believed it would. Again, we think there is a tremendously large unmet medical need here and that KRYSTEXXA with methotrexate is serving the marketplace well. So we're looking forward to working with our colleagues on it. And overall, I'd say that the business is proceeding as we thought it would to this point. The things that we were -- that we thought were important to have in hand, like the chronic indication for Tepezza, like, international datasets that were made available with the OPTIC-J trial, like the progress we've made in Brazil, et cetera. Those were things that we wanted to have in hand and now do. And, again, UPLIZNA also performing very much in line as we expected it would. So we see three growth opportunities there and we see ways for the Amgen-based business to add value to what Vikram will be running now in our rare business area. And then, with respect to the question on diabetes, I’ll ask Dave, [Multiple Speakers]

I mean, I think, the broader context here is important. These patients have severe uncontrolled gout. They are often facing amputations, for example, because of the severity of the disease. And so there are large number of these patients that are currently not being served in the market in clinical practice. And so our focus is on reaching those patients where the quality-of-life impediments are quite significant, and the effects of the drug can be quite dramatic in improving the disease course and improving that sort of quality of life. So that's the focus right now. I wouldn't get distracted by some of the other potential associations.

Now, operator, I think we have two more calls in the log here. So why don't we take two more and then we'll thank our colleagues and let them get on with the day.

Certainly. Thank you, Evan. Our next question comes from Tim Anderson from Wolfe Research. Please go ahead. Your line is open.

Thank you. On AMG 133, maybe this is a silly question, but is it at all possible that you can start Phase 3 in 2024? The main way to do this would be to do an early or interim look of sorts at the Phase 2 trial before the primary completion date. And I know you're guiding for top-line on that in late '24. Thank you.

Yeah. I mean, as we go through '24, we will give guidance on when we expect, you know, the Phase 3 program to launch. You know, as is customary in these programs, we will take an interim look. That will remain blinded, we will not release that externally, because this is a 52-week study, but that will help at least guide our thinking. Also recall that the FDA requires a certain safety database before you launch Phase 3 trials here. And so as we get into next year and start to have those conversations, we will be able to give more definitive guidance as to when you can expect the launch of the Phase 3 program and what that suite of studies might look like.

And let's take our last question.

Thank you, Tim. Our last question will come from Colin Bristow from UBS. Please go ahead. Your line is open.

Hi. Good morning, and thanks for taking the questions. Maybe just a quick follow-up on 133. Just as we think about this from a commercial perspective, this is obviously an antibody backbone. It's going to be an injectable. Just in light of margin that's achievable with this, just help us think through that. Thanks.

Well, Colin, you rightly point out that this is an antibody backbone. The properties of that, obviously, as I was alluding to earlier, could be that you can dose it much less frequently than you have to with the current therapies on the market. We also think, given the potential differentiation on efficacy and possibly tolerability, that we will be able to establish a very strong position in the market for people who need rapid, deep, and sustained weight-loss that they can manage over time, so that they can gain the benefits, the reduction in cardiovascular risk, the improvement in outcomes from that treatment. But we expect, as Dave said, to develop this product across a suite of Phase 3 experiments, and we expect to be able to take a decent share of the market, which will drive a good return on our investment in that product.

Thank you, Colin. I would now like to turn the call back over to Bob Bradway for closing remarks.

Okay. Well, let me thank all of you for joining us this morning. And we hope that the choice of doing this in the morning frees you up to go enjoy the afternoon and evening of trick-or-treating wherever you are. But we again, appreciate your support. It's been an eventful few months at Amgen. And we'll look forward to having an opportunity to regather with you and report on the fourth quarter when we get to the new year. Many thanks.

This concludes our 2023 Q3 earnings call. You may now disconnect.