Amgen Inc. (NASDAQ:AMGN) Q4 2023 Earnings Call Transcript

Amgen Inc. (NASDAQ:AMGN) Q4 2023 Earnings Call Transcript February 6, 2024

Amgen Inc. beats earnings expectations. Reported EPS is $4.71, expectations were $4.66. Amgen Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: My name is Julianne, and I’ll be your conference facilitator today for Amgen’s Fourth 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.

Justin Claeys: Thank you, Julianne. Good afternoon, and welcome to our fourth 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, Jay Bradner, I am pleased to welcome and he is joining us for the first time on our quarterly earnings call, and Peter Griffith, Dave Reese, will also be available during the Q&A session. Given the timing of these Horizon Therapeutics acquisition close, the results as shown in our press release and slides include contribution from the Horizon business from October 6 onwards. For the avoidance of doubt, this will also be the basis for our filed financial results. To supplement this information, Vikram will also provide sales information for these products for the full fourth quarter, including the first week of October as further context in his remarks.

Through the course of our discussion today, we’ll use non-GAAP financial measures to describe our performance and have provided appropriate reconciliations within the materials that accompany this call. We will also make some forward-looking statements, which are qualified by our safe harbor statement, and please note that actual results can vary materially. With that, over to you, Bob.

Robert Bradway: Okay. Thank you, Justin, and let me thank all of you for joining our call. 2023 was another year of performance and progress for Amgen, further positioning us to deliver attractive growth through the end of the decade and beyond. Last year, we delivered double-digit volume growth in all four quarters with balanced growth across products and geographies. 18 [ph] of our medicines generated record annual sales, including Repatha, Prolia EVENITY, TEZSPIRE, BLINCYTO, KRYSTEXXA and UPLIZNA. The acquisition of Horizon, which is completed on October 6, gives us a significant new rare disease business that now stands as a fourth pillar of growth alongside our leading general medicine, oncology and inflammation businesses.

The medicines we acquired are all very early in their life cycles and by leveraging Amgen’s world-class biologics manufacturing, decades of experience in inflammation and our extensive global presence, we believe these products have the potential to reach many more patients around the world. Last year, we also advanced the deepest and most diverse pipeline in our history with promising molecules at all stages of development across our four pillars of growth. We anticipate well over a dozen significant pipeline milestones this year. I’ll touch on a few. In General Medicine, we’ll generate Phase II data this year for our lead obesity molecule, MariTide, and we’re excited, of course, to learn more about this asset. We’re also advancing a number of early-stage assets in this space.

In Oncology, we have a June 12 PDUFA date for the FDA to complete its priority review of Tarlatamab as a third-line treatment for small cell lung cancer. Tarlatamab is the first bispecific T cell engager shown to be effective in addressing a major solid tumor. In this case, one for which there has been no new treatment in decades and which today has a 5-year survival rate of just 3%. We’re studying Tarlatamab in earlier lines of treatment and hope over the fullness of time to be able to serve the tens of thousands of patients diagnosed with small cell lung cancer each year in the U.S. and major markets around the world. We’ve done this very successfully now with our first BiTE BLINCYTO, which has steadily moved into earlier lines of treatment for acute lymphoblastic leukemia, and we’ll take the same approach with yet another promising BiTE at being Xaluritamig in prostate cancer.

In inflammation, we’ll have Phase III data from Rocatinlimab in atopic dermatitis from the first of 1 are now 8 trials in the ROCKE program. And in rare disease, we’ll have Phase III data for UPLIZNA and myasthenia gravis and IgG4-related disease. At a time when a rapidly aging global population needs more innovation, Amgen is delivering, both with the medicines we have in the market today and with the promising new medicines that are advancing in our pipeline. We’re also excited by the rapid convergence of biotech and tech, which is enabling us to innovate more quickly and confidently. We’ve been preparing for this hinge moment for more than a decade and recently named Dave Reese as our first ever Chief Technology Officer to ensure that we’re capitalizing on technologies like generative artificial intelligence, not just in R&D, but across the entire company.

Succeeding Dave is Amgen’s Head of R&D is Jay Bradner. Jay is a physician scientist and a seasoned R&D leader, having served for many years as President of the Novartis Institute for Biomedical Research. Jay previously also served as a faculty member at Harvard Medical School and prior to joining Amgen was a practicing oncologist at the Dana-Farber Cancer Institute. We’re delighted to have Jay on board and excited by the work that he Dave and the rest of our team will do together to accelerate innovation at Amgen for the good of patients and for the long-term growth of our business. And with that, I want to thank our 27,000 employees around the world for their many contributions to our success. And let me now ask Murdo to talk about our commercial performance in 2023.

Murdo Gordon: Thanks, Bob, and I’m very pleased with our performance in 2023. Execution was strong across the business, resulting in record sales in the year for 18 brands and robust volume growth across the four pillars of our business. Full year product sales increased 9% year-over-year. Volume growth was 15% with strength across our regions. U.S. volume growth was 14% and volume growth in our Europe, Latin America, Middle East and Canada region was 10%. Asia Pacific continues to be our fastest-growing region with 41% volume growth. These results include $954 million of sales from the legacy Horizon portfolio from the period of October 6 through December 31. I’ll start with our General Medicine business, which includes Repatha, Prolia EVENITY and Aimovig.

Overall revenue for these four products grew 15% year-over-year in the fourth quarter and 17% for the full year, driven by 18% and 20% volume growth, respectively. Repatha sales increased 25% year-over-year in the fourth quarter with volume growth of 35%, partially offset by lower net selling price. Outside of the U.S., we saw 25% volume growth with strength across our regions. In the U.S., volume growth of 48% was driven by a 66% increase in the number of new patients starting treatment. We saw a decline in net selling price in the U.S., primarily driven by new formulary coverage. We expect this additional coverage to lead to strong volume growth, which will more than offset declining net selling price. In addition, some payers have recently removed prior authorization for some patients, which will further ease their access to Repatha.

We remain committed to the urgent need to educate physicians and patients on the importance of LDL-C lowering to reduce the risk of cardiovascular events. In the U.S., we activated more than 20,000 new prescribing physicians in 2023 in both the primary care and cardiology settings. And while we’re pleased with this progress, we’ll continue to work tirelessly for the many, many more patients around the world who can benefit from Repatha. Transitioning to bone health, EVENITY had record sales of $318 million for the quarter, driven by 39% volume growth. Osteoporosis disproportionately impacts postmenopausal women and the diagnosis and treatment rates for these patients are low. In the U.S., only 6% of very high-risk patients with osteoporosis are treated with a bone builder, creating an urgent need for treatment with an effective therapy.

EVENITY is an important therapy to address this unmet need as it is the only bone builder that works with the body’s natural ability to increase bone formation and also decrease bone resorption. We see strong growth potential for EVENITY and we’ll continue to apply our proven experience in bone health to ensure it reaches all the patients who need it. Prolia sales grew 12% year-over-year to a record $1.1 billion for the fourth quarter. Volume growth of 10% was supported by real-world evidence reaffirming Prolia superiority in reducing fracture risk when compared to alendronate in treatment-naive patients with postmenopausal osteoporosis at a high risk of fracture. Moving to our oncology business, which includes BLINCYTO, LUMAKRAS, Vectibix, KYPROLIS, Nplate and XGEVA.

Sales of these six innovative products grew 5% year-over-year for the fourth quarter, with 3% volume growth. Full year sales grew 12% year-over-year, driven by 12% volume growth. BLINCYTO sales grew 47% year-over-year to a record $241 million for the fourth quarter. Volume growth of 55% was supported by broad prescribing to patients with acute lymphoblastic leukemia in frontline consolidation treatment. Long term, we see significant growth potential for BLINCYTO from utilization earlier in the front line as part of induction treatment. LUMAKRAS sales increased 8% year-over-year for the fourth quarter. We see future growth opportunities for LUMAKRAS coming from launches in new markets and additional indications. Vectibix sales increased 5% and KYPROLIS sales grew 8% year-over-year for the fourth quarter, both driven by volume growth.

Nplate sales decreased 18% year-over-year for the fourth quarter, driven by volume decline related to timing of orders placed by the U.S. government, partially offset by volume growth across our regions. Full year sales increased 13%, primarily driven by volume growth, including U.S. government orders. Excluding U.S. government orders, Nplate sales grew 23% year-over-year for the fourth quarter and 8% for the full year. Transitioning to our inflammation business. Otezla sales increased 2% year-over-year for the fourth quarter, driven by favorable changes to estimated sales deductions and 3% volume growth, partially offset by lower inventory levels and lower net selling price. Full year sales decreased 4% driven by lower net selling price and lower inventory levels, partially offset by 2% volume growth.

New patient starts for Otezla grew 6% in the fourth quarter, driven by strong execution and increased investment. Competitor free drug programs had a reduced impact in the quarter. Otezla is uniquely positioned to grow in 2024 and beyond, given its indication for all severities of psoriasis, combined with an established clinical profile, broad payer coverage, a lack of testing required for initiation and convenient oral administration. Enbrel sales decreased 8% year-over-year for the fourth quarter, driven by a 4% impact from unfavorable changes to estimated sales deductions and lower net selling price. U.S. volume grew 1% in the fourth quarter, supported by an increase in new patients starting treatment as a result of improved payer coverage.

Going forward, we expect net selling price to continue to decline year-over-year driven by higher rebates to maintain broad first-line payer coverage and changes in patient mix. TEZSPIRE continues a strong launch trajectory with $177 million in sales in the fourth quarter and $567 million for the full year. Sales increased 10% sequentially, driven by volume growth. Our successful launch of a self-administered prefilled single-use pen allowed us to expand coverage with major pharmacy benefit managers to over 80%, contributing to higher new patient growth as the year progressed. Moving forward, we expect this expanded coverage will allow TEZSPIRE to help even more patients with severe uncontrolled asthma. Sales of TAVNEOS were $44 million in the quarter and $134 million for the full year.

In the fourth quarter, we saw a 17% quarter-over-quarter volume growth in the U.S. Approximately 2,700 patients have now been treated with TAVNEOS by over 1,700 health care professionals. Looking forward, we will continue to leverage our expertise in nephrology and inflammation to bring TAVNEOS to even more patients with ANCA-associated vasculitis. Sales for our biosimilars portfolio grew 10% year-over-year for the fourth quarter and 5% for the full year, driven by 27% and 29% volume growth. This volume growth was partially offset by net selling price decline. Over time, we expect long-term growth in our biosimilars business to be driven by the addition of new molecules and additional launches. Overall, our execution is strong across the business, underscored by our foundational commitment to serve patients.

The four pillars of our portfolio position us well to serve many more patients around the world who can benefit from our innovative therapies. And with that, I’ll turn it over to Vikram, who will cover our rare disease portfolio.

Vikram Karnani: Thanks, Murdo. I am glad to share an update on our rare disease business now that we are 4 months past due close. We are now fully operating as part of Amgen with integration activities ongoing. As Bob has mentioned before, we are excited to be Amgen’s fourth pillar of long-term growth. I wanted to make sure you’re aware that we are not reporting the full quarter in press release and slides, which reflects sales from October 6 onwards and totaled $954 million. This excludes $41 million of sales that occurred in the first week of October prior to deal close. For the full quarter, our rare disease brands from Horizon delivered product sales of $995 million, representing 6% year-over-year sales growth. Throughout the remainder of my remarks, I will reference full quarter product sales.

TEPEZZA, and IGF-1R monoclonal antibody for patients with thyroid eye disease generated $467 million of sales during the entire fourth quarter, representing 3% quarter-over-quarter growth. This is the third quarter in a row of quarter-over-quarter growth for TEPEZZA with the growth largely driven by the U.S. We saw a number of positive leading indicators, including a record number of unique TEPEZZA prescribers, total patient enrollment forms and patient starts in 2023. Additionally, thanks to our efforts, we’ve been able to generate favorable medical policy changes for greater than 50% of U.S. covered lives, and we expect to continue this momentum throughout 2024. We continue to see approximately 100,000 patients with moderate to severe disease in the U.S. who could benefit from TEPEZZA with the majority of these patients in low clinical activity score settings.

Given positive leading indicators and high unmet need, we see a long-term growth opportunity for TEPEZZA in the U.S., while also recognizing there is some time lag between our execution efforts and the realization of increased patient numbers. International expansion also remains a meaningful long-term growth opportunity for TEPEZZA. TEPEZZA is approved in Brazil, and we are progressing towards approval in additional countries. Our expansion into both Japan and Europe is a high priority with regulatory review underway in Japan and filings in the EU throughout the year. KRYSTEXXA, a PEGylated uricase enzyme for patients with chronic refractory gout delivered a record $280 million in sales for the entire fourth quarter, representing 30% year-over-year growth, driven by continued strong commercial execution.

Sales are now annualizing at $80 billion [ph] run rate. Performance was driven by execution across all phases of the patient journey, demand generation, stakeholder engagement and adherence to treatment. UPLIZNA, an anti-CD19 monoclonal antibody, which is now the fastest-growing biologic in NMOSD, delivered a record $70 million in sales for the entire fourth quarter, representing 68% year-over-year growth. International expansion is also underway with UPLIZNA now launched in multiple ex U.S. markets. Our remaining ultra-rare portfolio generated $178 million of sales for the entire fourth quarter, primarily driven by our ultra-rare medicines, RAVICTI, PROCYSBI and ACTIMMUNE. Looking ahead at 2024 by leveraging Amgen’s world-class biologics capabilities, decades of experience in inflammation and extensive global presence, we are ready to reach more patients than ever before.

I will now turn it over to Jay.

Jay Bradner: Thank you, Vikram, and good afternoon, everyone. I’d like to take a minute to convey how thrilled I am to join the Amgen R&D organization and its leadership team. The creativity of our discovery research, expert and expedited clinical development, most authoritative biomanufacturing organization in the industry, all were well known to me before joining. But now on staff at Amgen, I appreciate the strong sense of service, the patients facing serious illness, the like-minded commitment, growing the impact of our medicines and our business and the shared conviction in this remarkable portfolio of potential first-in-class and best-in-class medicines. In 2023, we executed with speed across our clinical pipeline, achieving excellent enrollment in key programs and setting up 2024 as the year with significant data readouts across the portfolio for medicines with the potential to transform patient care.

Key highlights in 2023 included the delivery of promising data from four key oncology assets and the attainment of three breakthrough therapy designations in oncology. We initiated pivotal Phase III studies for Tarlatamab in small cell lung cancer, LUMAKRAS in non-small cell lung cancer and colorectal cancer, along with dazodalibep in Sjögren’s syndrome. In General Medicine, as previously disclosed, top line 52-week data from the 592 patient MariTide Phase II study is expected by late 2024. Leveraging the durability of weight loss observed in Phase I and rapid enrollment enjoyed in Phase II, we recently added a part 2 to this study, which explores durable weight loss beyond 52 weeks. Our planning for a comprehensive Phase III program across multiple indications remains on track.

Lastly, you may have seen that yesterday, Nature Metabolism published manuscript from Amgen R&D that provides the integration of MariTide preclinical and Phase I data. Beyond MariTide, our obesity strategy encompasses several assets with AMG 786 in Phase I and additional preclinical assets advancing. Our approach is tailored to meet the dynamic needs of obesity treatment, demonstrating a longitudinal commitment to innovation and patient care in this field. The Phase III outcome study of Olpasiran are potentially best-in-class Lp(a) targeting small interfering RNA molecule and atherosclerotic cardiovascular disease has enrolled more than 7,000 patients globally. This rapid enrollment accomplished in just 1 year across 34 countries and over 700 sites underscores the medical community’s strong interest in and the potential impact of Olpasiran.

We’ve deliberately expanded our initial enrollment target from 6,000 to over 7,000 patients to ensure comprehensive demographic representation and to satisfy regional regulatory requirements. We are on track to complete enrollment in the first half of 2024. In oncology, we’re focused on approaching high conviction targets with differentiated therapies for large effect size. We’re pleased to announce that the FDA granted priority review for BLINCYTO in early-stage CD19-positive B-ALL with a PDUFA date of June 21, 2024. The ongoing Phase III Golden Gate study is enrolling patients to evaluate the effectiveness of alternating BLINCYTO with low intensity chemotherapy here in older adults diagnosed with Philadelphia chromosome-negative B-ALL. We’re also planning to amend this study to evaluate subcutaneous administration of blinatumomab with initiation anticipated in the second half of 2024 potentially allowing us to serve more patients in treating physicians.

Lastly, we’re pleased to announce that just today, the American Journal of Hematology published a manuscript highlighting data from the dose expansion phase of our ongoing Phase Ib study of subcutaneous blinatumomab as a single agent in adult patients with heavily pretreated relapsed/refractory B-cell ALL. Of 27 evaluable patients treated, we observed an 85% complete response rate, of which 75% were MRD negative. Subcutaneous blinatumumab is well tolerated with no observed grade 4 cytokine release syndrome. Turning to Tarlatamab, a first-in-class DLL3-targeting BiTE molecule, the FDA granted priority review following promising results from the Phase II DeLLphi-301 clinical trial and a PDUFA date of June 12, 2024. We are rapidly advancing Tarlatamab into earlier lines of treatment, where we have initiated two Phase III studies and plan to initiate a third in the first half of 2024.

Xaluritamig, a first-in-class STEAP1 bispecific molecule being studied in metastatic castrate-resistant prostate cancer continues to progress following the presentation of encouraging Phase I data last fall. We are ahead of schedule with the monotherapy dose expansion and expect to complete enrollment in the coming weeks. We’ve opened a reduced monitoring cohort and are making significant progress in dose range finding studies in combination with novel hormonal therapy combinations. For AMG 193 in oral MTA cooperative PRMT5 inhibitor were encouraged by 9 responses we’ve seen across 7 MTAP-null solid tumors. MG 193 is a terrific example of a medicine targeting a genetically defined synthetic lethality and a first clinical translation of our induced proximity platform.

We’re now swiftly moving forward with dose expansion studies and plan to enter master protocols and thoracic and gastrointestinal malignancies, exploring combinations with standard of care in the first half of 2024. In our inflammation portfolio, we continue to explore TEZSPIRE and indications beyond severe asthma, including separate Phase III studies in chronic rhinosinusitis with nasal polyps, where top line data are expected in the second half of 2024 as well as in eosinophilic esophagitis. We also remain on track to present Phase II COPD data in the first half of 2024. Our ROCKET Phase III program for rocatinlimab, the first-in-class anti- OX40 -mon colonal antibody has successfully enrolled over 2,400 patients with moderate to severe atopic dermatitis.

We’re introducing an 8th study to the ROKET program to explore an auto-injector, and we are planning to initiate both the Phase III study in prurigo nodularis and a Phase II study in asthma this year as we seek to broadly explore the potential of rocatinlimab. Lastly, we are encouraged by the advancements of our rare disease pipeline with several mid to late-stage opportunities. In December, TEPEZZA received orphan drug designation in Japan where we’ve also recently submitted a new drug application for TEPEZZA in thyroid eye disease. To serve additional patients in Japan, we have a Phase III study underway in the study of chronic disease with a low clinical activity score. Beyond Japan, we are progressing TEPEZZA subcutaneous administration to drive increased adoption and improve patient experience and plan to initiate a Phase III study in thyroid eye disease this year.

With UPLIZNA, we anticipate important Phase III data readouts this year in myasthenia gravis and IgG4-related disease. Both diseases with significant unmet need and where we have the potential to make a real difference for patients. Dazodalibep, an innovative CD40-ligand inhibitor fusion protein has entered Phase III for Sjögren’s syndrome. This follows encouraging Phase II data with efficacy across patients with moderate to severe systemic disease and patients with high symptom burden. Dazodalibep is the first therapy to demonstrate efficacy in this latter patient population. Closing on our rare disease efforts, we’re excited about Fipaxalparant, an LPAR1 antagonist being studied in idiopathic pulmonary fibrosis, on track for a Phase II proof-of-concept data readout in the second half of 2024.

In closing, I’m delighted to report on the important progress we make advancing our innovative pipeline, and I’m looking forward to sharing more pipeline milestones through 2024. I’ll now turn it over to you, Peter.

Peter Griffith: Thank you, Jay. We’re pleased with our strong execution and performance in the fourth quarter and for the full year 2023. In the fourth quarter, total revenue of $8.2 billion grew 20% year-over-year and non-GAAP EPS of $4.71 grew 15% year-over-year. For the full year, we delivered total revenue of $28.2 billion, 7% growth year-over-year and non-GAAP EPS of $18.65, 5% growth year-over-year. As a reminder, both Q4 and the full year results include Horizon’s results beginning October 6 when the acquisition closed. So our financial results will exclude approximately 1 week of Horizon’s results from our fourth quarter results. I’ll review the details of our fourth quarter and full year financial results before discussing our outlook for 2024.

The financial results are shown on Slides 54 to 56 of the slide deck. Turning to our fourth quarter’s total revenue of $8.2 billion. We saw product sales increased 20% year-over-year, driven by volume growth of 23%, offset by net selling price decline of 3%. Excluding the impact of Horizon, product sales increased 5% year-over-year driven by volume growth of 9%. Full year total revenues of $28.2 billion grew 7% year-over-year. Product sales increased 9% year-over-year, driven by 15% volume growth. Other revenues decreased 16% year-over-year, primarily due to lower profit and cost sharing from our COVID-19 collaboration with Lilly in 2022. Strong expense discipline resulted in a 50% non-GAAP operating margin as a percentage of product sales for the full year 2023.

While we continue to focus on both internal and external innovation, investing $4.7 billion in our pipeline and $27.8 billion in our acquisition of Horizon. With product sales volume growth at 23% in Q4 and 15% for the full year, we still efficiently manage the operating expenses of the business. Q4 non-GAAP operating expenses increasing 18% year-over-year, while full year non-GAAP operating expenses increased 9%. Excluding the impact of Horizon, Q4 non-GAAP operating expenses increased 3% and full year non-GAAP operating expenses increased 5%. On a non-GAAP basis, Q4 cost of sales as a percentage of product sales was flat on a year-over-year basis at 16.3%. For the full year, cost of sales as a percentage of product sales increased by 1.1 percentage points to 17.0%.

The full year increase was primarily driven by higher profit share and changes in our product mix, partially offset by the replacement of the Puerto Rico excise tax with an income tax beginning in 2023. Non-GAAP R&D spend in the fourth quarter increased 16% year-over-year and 8% year-over-year for the full year primarily due to higher spend on later-stage clinical program and marketed product support, including spend on programs acquired from the Horizon acquisition and continuing investment in our pipeline, including MariTide. Q4 non-GAAP SG&A expenses increased 20% year-over-year, primarily driven by commercial and G&A expenses related to the Horizon acquisition. Full year non-GAAP SG&A expenses increased 5% year-over-year, primarily driven by commercial and G&A expenses related to the Horizon acquisition, partially offset by a decline in other marketed product spend.

Non-GAAP OI&E were about $635 million in expense in the fourth quarter, a $168 million increase year-over-year, primarily driven by increased interest expense related to the debt issued for the Horizon acquisition. Full year non-GAAP OI&E was favorable $279 million year-over-year, primarily driven by the change in accounting for the BeiGene investment to the fair value mark-to-market method and by gains related to early debt retirement, partially offset by higher net interest expense. Our non-GAAP tax rate increased 2.5 percentage points year-over-year to 15.9% in the fourth quarter and 2.7 percentage points year-over-year to 16.5% for the full year primarily due to the 2022 Puerto Rico tax law change mentioned previously. The company generated $7.4 billion of free cash flow in 2023 compared with $8.8 billion in 2022.

The decrease is driven by the Horizon transaction and integration costs, higher repatriation tax payments and higher capital expenditures. We expect to continue to generate strong cash flows with the addition of Horizon and are on track with our deleveraging plans to return to our efficient capital structure by the end of 2025. In summary, we continue to execute on our multiple capital allocation priorities. First, we continue to prioritize investments in both internal and external innovation. Our increased spending in non-GAAP R&D of 8% in ’23 over ’22, coupled with the acquisition of Horizon Therapeutics, continues to broaden and strengthen our balanced portfolio across therapeutic areas. With our strong late-stage innovative pipeline moving forward through development, we expect our non-GAAP R&D to continue to increase in 2024.

Second, we continue investing in our business for long-term growth, including our state-of-the-art manufacturing facilities in Ohio and North Carolina. Amgen, Ohio, our new advanced assembly and final product packaging plant has just received license from the FDA for commercial production in January, roughly 2 years after we broke ground and our innovative drug substance plan under construction in North Carolina is expected to be operational by 2026. In addition, we’ve positioned the organization to accelerate investments in innovation, including leveraging the power of generative artificial intelligence. And third, we returned capital to shareholders through growing dividends, including $2.13 per share in the quarter. This represented a 10% increase over that paid in each of 2022 four [ph] quarters.

Turning to the outlook for the business for 2024. First, because this is the first full year incorporating the impact of Horizon, we’re providing some additional granularity in our guidance, which we don’t expect to repeat to the same extent in the future. For 2024, we’re expecting revenue of $32.4 billion to $33.8 billion and non-GAAP earnings per share of $18.90 to $20.30. As we continue to integrate Horizon, we expect the acquisition to be accretive to non-GAAP EPS in 2024, and we’re on track to meet the synergies target previously communicated of at least $500 million in pretax cost by year 3 after closing or in 2026. Our revenue range reflects our strong growth outlook driven by numerous opportunities across our four therapeutic area pillars.

We will record a full year of legacy Horizon product sales, and we expect continued volume-driven growth in our priority products Repatha, TEZSPIRE, EVENITY, Prolia and BLINCYTO consistent with industry trends in our recent history, we expect mid single-digit price decline for our portfolio in 2024. As a reminder, as you model the first quarter of 2024 and consistent with our historical trends, we expect first quarter product sales to be the lowest quarter as a percentage of the full year due to benefit plan changes, insurance reverifications and increased co-pay charges. So we expect the first quarter of 2024 total revenue to grow roughly 20% year-over-year. For the full year, we expect other revenue to be in the range of approximately $1.3 billion to $1.4 billion.

And we continue to efficiently run the business through our disciplined approach to managing operating expenses. In 2024, we’re making incremental R&D investments to support our promising late-stage pipeline, including our rapidly advancing oncology programs as discussed following ESMO in October and other programs, including MariTide. Furthermore, the addition of Horizon has an impact on the 2024 operating margin given the timing of when synergies are realized. As a result, we project the full year non-GAAP operating margin as a percentage of product sales to be roughly 48%. Note that we expect non-GAAP operating margin growth to accelerate in each of the quarters following the first quarter. There are primarily three reasons for this. First, typical lower product sales in Q1, as I mentioned above, and in each of the following quarters.

Second, increased spend on our commercial brands will continue building on the investments we made in the second half of 2023, including Repatha, Otezla, and our bone portfolio of EVENITY and Prolia And third, Q1 2024 reflects the addition of Horizon, for which we are just at the beginning stages of realizing synergies given the acquisition close date of October 6. So we expect non-GAAP operating margin to be roughly 43% in the first quarter. I would reiterate that we expect operating margin growth to accelerate in each of the quarters following the first quarter. We project non-GAAP cost of sales to be in the range of 17% to 18% as a percentage of product sales for the 2024 year. Taking into account the full year of Horizon related expenses, we expect non-GAAP R&D expenses in 2024 to increase approximately 20% year-over-year with investments also increasing to advance key pipeline assets, including AMG 193, MariTide, rocatinlimab and tarlatamab.

We see significant potential in our innovative pipeline, and it is important that we strategically invest now to fully unlock the opportunities ahead to create long-term value for patients, staff and shareholders. And for non-GAAP SG&A spend, we expect 2024 full year amounts as a percentage of product sales to be between 21% and 22%. We anticipate non-GAAP OI&E to be in the range of $2.6 billion to $2.7 billion. As mentioned on our Q3 ’23 call, the ’24 guidance includes the interest expense related to the $28 billion of debt rates for the Horizon acquisition. We expect a non-GAAP tax rate of 16% to 17%. Our guidance is primarily being driven by two factors. The first is the jurisdictional mix of income, including the full year benefits associated with the Horizon transaction and the legal entity rationalization undertaken in the fourth quarter of 2023 in part to integrate the Horizon entities into our existing U.S. headquartered legal entity structure.

The second is the benefit from a planned payment to the IRS as an advanced deposit as we’ve done in the past to stop the accrual of interest on uncertain tax positions. There is no change in our belief in the merits of our legal arguments with the IRS as we prepare for trial. Given the interest rate environment, although the deposit negatively affects our cash flow in ’24, if any of the deposit is returned to us upon the resolution of our litigation, those funds would accrue interest income. Therefore, the makes this payment makes this payment a prudent use of our capital. Once again, out of an abundance of clarity, this represents no change in our belief in the merits of the tax court case. The guidance also includes the impact of the adoption of the OECD 15% minimum tax by certain jurisdictions.

Based on our individual footprint, we don’t anticipate any significant effects of the new rules in 2024, but we’re closely watching the global tax landscape for future impacts as the framework continues to be considered by additional jurisdictions and new rules take effect. We expect governments around the world, including the United States to continue to look for more sources of tax revenue from large multinational corporations that could result in higher taxes in the coming years. Similar to 2023, we expect share repurchases not to exceed $500 million in 2024 we expect that we will continue to increase our dividend. We expect capital expenditures of approximately $1.1 billion in 2024, consistent with our capital allocation priority to invest in our business, including the Ohio and North Carolina facilities I mentioned ahead and into the rare disease pillar.

In summary, we delivered another strong year of financial results in 2023. Our confidence in the long-term growth of Amgen is strong, and we believe that our new rare disease pillar, one of our four pillars will be an important additive source of growth for the company. This concludes the financial update. My thanks to my approximately 27,000 plus colleagues at Amgen around the world for their commitment to our mission of serving patients and their tireless efforts in 2023. I’ll turn it back to Bob for Q&A.

Robert Bradway: Okay. Thank you. Let’s open the line, and we’ll take questions from our callers. And Julian, why don’t you remind them of the procedures so we can get through these questions here efficiently for everyone.

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

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Q&A Session

Michael Yee: Hey, guys. Good afternoon, and thanks for good results and good guidance. We had a question on obesity. On 133, of course, you had the publication yesterday I feel like it was the most scrutinized Phase 1 publication. But maybe you could just talk to – maybe Jay could talk to your interpretation of some of the markers, for example, lipids, A1C, blood pressure and all that kind of thing. And maybe talk about your confidence about the profile versus competitors? Thank you so much.

Jay Bradner: Yes. Thanks a lot, Michael. We really appreciate the consideration the Phase 1 paper is receiving from the community. It’s exciting to report these data. For those who haven’t seen it, this was a randomized, double-blind, placebo-controlled study, 49 patients, looking at safety, PK, PD, single ascending dose, 7 cohorts, multiple ascending dose 3 cohorts, 3 monthly doses, patients with obesity being migrated than 30. And we were quite pleased with the outcome. Looking at the 420-milligram dose as an example, which was the highest dose study, 14.5% weight loss at only day 85. And moreover, quite durable coming off of that medicine out to 150 days, all with relatively mild gastrointestinal side effects. And so to answer your last question first, we find the Phase I data, which we’re pleased to share with the community to be quite supportive of our ongoing work to develop this medicine to the greatest possible benefit of patients suffering from obesity.

Now you’ve asked questions around some of the measurements on this study, lipid, blood pressure and A1C. And I would just caution that this is a Phase I trial, the numbers are very small, that the duration of treatment is rather short. But even with all of those caveats, while hard to draw conclusions from such small numbers, especially labile measurements like blood pressure and lipids, all are directionally favorable. And so we have – we take no concern whatsoever from those measurements on the study.

Michael Yee: Okay. Thank you. Those are the questions. Yeah.

Operator: Thank you, Michael. Our next question comes from Salveen Richter from Goldman Sachs. Please go ahead. Your line open.

Salveen Richter: Good afternoon. Thanks for taking my question. Another one here on the obesity program. So post the published Phase I data, how are you thinking about differentiation on GI tolerability? Is the dose range being evaluated in the Phase II study similar to that in the Phase I? Thank you.

Jay Bradner: Yes. Thanks for the question. I’ll take this one as well. As you may or may not know, the Phase II study, which is ongoing at present and going very well, explores 11 dosing cohorts with relevant placebo controls. And through that study, we’ll have a chance to gain an experience with a longer exposure to MariTide dosed in different ways. We’ve recently added a part 2 to this study that will allow us to explore even more durable weight loss beyond 52 weeks enabled by just very rapid enrollment. And these four dosing cohorts will go on to test dose level and even less frequent dosing schedules than monthly. And so these Phase II data, even by end of year will be strongly instructive as to finding a safe and tolerated and efficacious dose to carry into Phase III clinical investigation.

Robert Bradway: Yes. The only thing I would add is we’re starting from a basis of a monthly dosing cadence and schedule. And so the additional dosing cohorts would look at potential dosing schedule beyond monthly. And the data are pretty clear in the market right now that the GI toxicity or GI side effects are generally related to the day of dosing of the GLP-1s, which are dosed weekly. We see some of that same GI side effect profile in kind of the first dose part of the dose titration. But there’s an opportunity here to potentially spread the dosing intervals out further and further improve tolerability in our program. And as Jay clearly described, we’ve got all of the different aspects of that being studied in the Phase II program.

Justin Claeys: Thanks, Julianne. We’ll go to the next question.

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

Jay Olson: Hey, thank you so much for taking a question, and congrats on the progress. Another question on 133. Talk about whether or not that we see later this year will include patients from two of the study? And do you think it’s possible that 133 could be dosed twice every 2 or 3 months? And also, if you could just comment on the rollover rate of patients from Part 1 to Part 2? Thank you.

Robert Bradway: Jay, could you catch all that some of what Jay asked was broken up at the beginning…

Jay Bradner: The third part was a little bit broken up of your question. I heard a better explanation of part two frequency of dosing. And then I did not hear your third part.

Jay Olson: If you just comment on the rate of patients rolling over from Part 1 to Part 2? Thanks.

Jay Bradner: Okay. Yes. Thank you for the question, Jay. Let me give a little bit of context on this Part 2 study that I think will help answer them. In part 2, the intent is to really look at durable weight loss beyond 52 weeks. And so by durable weight loss, patients eligible for Part 2, which begins at the end of 52 weeks, will be responding to this medicine. And then they’ll be rerandomized to four cohorts that will test dose level. And again, this even less frequent dosing schedule. We have not disclosed the granularity on the dosing schedule. This is a competitive environment. But we’re afforded this chance because the ADC, the antibody core of MariTide, like so many immunoglobulin therapeutics allows for the opportunity to use it much less frequently. The rate of patients rolling over to Part 2 will be established as the Phase II study continues to progress this year.

Justin Claeys: Thank you, Julianne. Next question.

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

Chris Schott: Great. Thanks very much. Just maybe to pivot over to TEPEZZA [ph] for a question. Can you just talk a little bit about the dynamics for 2024? It seems like the products come back to growth. But I’m just trying to get a sense of now that Amgen owns the asset and has more kind of time with it. What are your top priorities? And how do you think about continuing to kind of grow the new patient base here? Thank you.

Robert Bradway: Sure, Chris. Maybe we’ll take it in a couple of parts. But Vikram, share your thoughts first.

Vikram Karnani: Yes. Thank you for the question. I think if you focus a little bit on what are the underlying factors that are driving TEPEZZA growth, we saw a record number of unique TEPEZZA prescribers. We saw an increase in patient enrollment forms and patient starts. In addition, we’ve made pretty significant progress on payer coverage, as we’ve seen our covered lives have now increased to greater than 50% of U.S. covered lives. And that’s important, educating some of those stakeholders on the new clinical data updated indication, it continues to drive uptake across the full spectrum of TED patients. And finally, what holds all of this together is a really robust patient service model that supports patient access. I think we continue to make progress and execute towards each one of these important leading indicators.

And we shouldn’t forget that we – there is still low penetration of the approximately 100,000 patients that can be eligible for this medicine in the U.S. alone. Now, just one last point here is that as we’ve noted before, there continues to be a time lag between the execution of all of these efforts and the realization of increased patient numbers. As we said before, it can take up to 90 days once a patient is identified for therapy for that patient to actually get on therapy. But we’re pretty happy with all of our leading indicators and the execution that we have seen coming out of last year.

Robert Bradway: And Chris, the only thing I would add is building on what Vikram said in his prepared remarks, we’re excited about the international opportunity as well, and I think he characterized that well previously. And we’re also excited about what we see as ongoing opportunities to invest in innovation for the benefit of TED patients. So all in all, I feel excited about the rare disease pillar that we’ve established and the role that TEPEZZA will play in that.

Justin Claeys: All right. Next question, Julianne?

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

Evan Seigerman: Hi, guys. Thank you so much for taking my question. I wanted to touch on TEZSPIRE specifically in COPD. How are you planning to differentiate given the pretty competitive data we saw from Dupixent [ph] And how should investors be looking at this data from an efficacy bar? Are there nuances in this trial that need to be clarified that might make it harder to do an apples-to-apples comparison?

Robert Bradway: Yes, and thanks for the question. Murdo, why don’t I start and then you add on. So it’s a great and timely question. The Phase II COPD study of TEZSPIRE, we expect data in the first half of this year. This was a big study, 337 patients, moderate to severe COPD. They’re having exacerbations despite being on triple therapy. And so reflective of the current unmet need inadequacy of therapy for patients with COPD. This is a slightly broader population than Dupi that we’re studying here. We’re totally on track for the readout. We quite like the mechanism here. You must know that TSLP [j works as a signaling factor upstream and by blocking it with our unique biotherapeutic, we block TSLP IL-25, IL-33 signaling. TSLP so many cell types modulating this airway Type 2 response.