Amgen Inc

NASDAQ:AMGN

Earnings Call Analysis

Amgen's Highest Quarterly Revenue and Strategic Growth

Amgen has announced a record second-quarter revenue of $8.4 billion, a 20% increase year-over-year, driven by a 26% volume growth. The company reported double-digit sales growth across 12 products and significant increases in non-GAAP operating expenses, including a 30% rise in R&D spending. The Horizon acquisition has been integrated well, with expected $500 million in pretax synergies by year three. For 2024, Amgen projects total revenues between $32.8-$33.8 billion and non-GAAP EPS between $19.10-$20.10. The company remains focused on expanding its innovative pipeline and maintaining long-term growth across its therapeutic areas.

Robust Revenue Growth

Amgen achieved a record revenue of $8.4 billion in Q2 2024, representing a 20% year-over-year increase, primarily driven by a 26% growth in volume. Excluding Horizon's addition, the company's product sales grew by 5% year-over-year, fueled by a 10% increase in volume. This robust growth indicates a strong market presence and increasing demand for Amgen's medicines.

Operating Margins and Cost Management

In Q2 2024, Amgen reported a non-GAAP operating margin of 48.2% of product sales. Despite a 30% year-over-year increase in non-GAAP operating expenses, the company maintained strong margins. This increase in expenses was primarily due to higher investment in R&D and SG&A, reflecting the strategic investment in Amgen's late-stage pipeline and the inclusion of Horizon's expenses.

Significant R&D Investments

Amgen's non-GAAP R&D spending surged by 30% year-over-year to $1.4 billion in Q2 2024. This substantial investment supports the company’s commitment to advancing its innovative pipeline across four therapeutic areas. Notable investments include late-stage development projects such as MariTide, rocatinlimab, and bemarituzumab. This continued focus on R&D underscores Amgen's strategic priority of innovation.

Debt and Capital Allocation

Amgen is actively managing its debt, having retired $1.4 billion in Q2 2024 and $2 billion year-to-date. The company remains on track to retire more than $10 billion of debt by the end of 2025. Additionally, Amgen returned capital to shareholders with dividends of $2.25 per share in the second quarter, a 6% increase from 2023, highlighting a balanced approach to capital allocation.

Revenue and Earnings Guidance

For full-year 2024, Amgen expects total revenue between $32.8 billion and $33.8 billion, with non-GAAP earnings per share projected to be between $19.10 and $20.10. The company anticipates mid-single-digit revenue growth in Q4 compared to Q3. These projections reflect Amgen's confidence in its ongoing performance and growth prospects.

Product Performance Highlights

Key products demonstrated significant growth in Q2 2024. Repatha sales grew 25% year-over-year to $532 million, driven by a 46% increase in volume. EVENITY sales increased by 39% to $391 million, and Prolia sales grew by 13% to $1.2 billion. TEPEZZA sales increased by 13% quarter-over-quarter to $479 million, reflecting successful market penetration and prescriber expansion.

Pipeline Developments

Amgen's pipeline shows promise with several key developments. The company received accelerated approval for IMDELLTRA, a new treatment for small cell lung cancer, and for BLINCYTO in the frontline treatment of B-cell precursor acute lymphoblastic leukemia. Additionally, Phase III data for UPLIZNA in IgG4-related disease were impressive, and TEZSPIRE was granted a breakthrough therapy designation for COPD treatment.

Strategic Initiatives

Amgen is expanding its manufacturing capabilities and opening a new global technology and innovation center in Hyderabad, India. These initiatives aim to support business growth and enhance digital capabilities across the organization. Furthermore, the company is increasing its focus on rare disease and inflammation portfolios, leveraging strategic acquisitions such as Horizon.

Future Outlook

Looking ahead, Amgen plans to initiate a broad Phase III program for MariTide and a Phase II trial for its use in diabetes. The company’s commitment to innovation and strategic expansions positions it well for sustained growth. Amgen's ability to navigate a competitive landscape while maintaining robust financial health highlights its effectiveness in executing long-term strategic goals.

Earnings Call Transcript 2024-Q2

[Operator]

My name is Julianne, and I will be your conference facilitator today for Amgen's Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] I would now like to introduce Justin Claeys, Vice President of Investor Relations. Mr. Claeys, you may now begin.

[Justin Claeys, executive]

Thank you, Julianne. Good afternoon, everyone, and welcome to our second quarter 2024 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 and Peter Griffith.

Through the course of our discussion today, we will 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.

Over to you, Bob.

[Robert Bradway, executive]

Okay. Well, thank you, Justin, and let me thank all of you for joining the call today. We're especially grateful in light of all of the volatility in the markets that you would carve out the time to be with us. So thank you.

Through the first half of the year, our business is performing well, and we remain confident in our ability to deliver attractive long-term growth. We're achieving strong results the same way we always have, which is by providing innovative medicines to address challenging diseases.

Starting with the end-market portfolio. Second quarter revenues grew 20% to $8.4 billion with numerous medicines delivering double-digit sales growth, including in general medicine, Repatha and EVENITY, in oncology, of course, Blucyto, an inflammation TEZSPIRE and then turning to rare disease, which delivered more than $1 billion on the quarter. I would highlight that KRYSTEXXA, UPLIZNA and TAVNEOS each delivered at least double-digit sales growth in the quarter.

And TEPEZZA grew 8% year-over-year and 13% quarter-over-quarter. All of these first or best-in-class medicines are still early in their life cycles and have plenty of room to run through geographic expansion, new indications and/or new formulations. You'll hear more about these brands in a moment.

Turning to research and development. We believe our pipeline looks very promising as well, not just in obesity, but across all of our therapeutic areas. We told you at the beginning of the year that we were anticipating more than a dozen significant pipeline milestones in 2024. Well, so far, so good. In the second quarter alone, we received accelerated approval for IMDELLTRA, a landmark new medicine for small cell lung cancer. And in fact, the physicians I've spoken to since approval are really excited about this drug as the first meaningful innovation in decades for these patients.

We also received approval for BLINCYTO in the frontline treatment for B-cell precursor acute lymphoblastic leukemia, based on significantly improved overall survival rates. The frontline approval meaningfully expands the potential impact of BLINCYTO for all patients with B-ALL.

We announced impressive Phase III data for UPLIZNA in IgG4-related disease, which is a grievous illness for which there are no currently approved therapies of any kind. Building on our success with TEZSPIRE in treating severe asthma, we announced exciting data from our Phase II study in patients with chronic obstructive pulmonary disease that earned this molecule breakthrough therapy designation.

COPD is the world's third leading cause of death, and new treatment options are very much needed. We look forward to additional data readouts later this year across therapeutic areas, highlighted, of course, by top line data from the ongoing MariTide Phase II study. We're encouraged by the emerging data in this field, particularly in cardiovascular and renal disease areas of long-standing strategic focus for us. We are laser focused on preparing to launch a broad Phase III program for MariTide that includes obesity, obesity-related conditions and Type 2 diabetes, and we're further ramping our investment to support MariTide in the rest of the pipeline. You'll hear more about that pipeline shortly on this call.

All in all, this is a very exciting time for us at Amgen. And as always, I'm grateful to my Amgen colleagues all around the world for their enduring commitment to patients.

And now let me turn things over to Murdo.

[Murdo Gordon, executive]

Thanks, Bob. Execution was strong in the second quarter, driving 20% year-over-year sales growth and all of our regions delivered attractive growth. Sales of 12 products grew at least double digits, including Repatha, TEZSPIRE, EVENITY, TAVNEOS and BLINCYTO, all brands that are important to our future growth.

Starting with our General Medicine portfolio. Sales of Repatha, EVENITY and Prolia collectively grew 20% year-over-year in the second quarter, driven by volume growth. Repatha sales increased 25% year-over-year to $532 million for the second quarter, now well on its way to becoming a multibillion-dollar business. In the quarter, we saw year-over-year volume growth of 46%, partially offset by lower net selling price. In the U.S., we see increased recognition of the importance of lowering LDL cholesterol by health care providers, payers and patients, which has significantly accelerated volume growth for Repatha. Our efforts have broadened insurance coverage and removed prior authorization requirements by several payers.

In a recent survey, roughly 95% of cardiologists responded that Repatha is accessible and that access has improved significantly versus 2 years ago. EVENITY sales increased 39% year-over-year to $391 million for the second quarter. In the U.S., volume growth was supported by both increased prescription volume from existing amenity prescribers and an expansion of new prescribers.

In Japan, EVENITY has been prescribed to approximately 600,000 patients to date and continues to be the segment leader with 45% of the Bone Builder segment. There are many women who remain at risk of a fracture due to postmenopausal osteoporosis. We're encouraged by the growth momentum we are driving and have conviction in the potential for EVENITY to help even more patients.

Prolia sales increased 13% year-over-year to $1.2 billion for the second quarter. Volume growth continues to be supported by real-world evidence demonstrating Prolia superiority in reducing fracture risk when compared to alendronate in treatment-naive patients with postmenopausal osteoporosis at high risk of fracture.

In inflammation, TEZSPIRE continues its strong trajectory with $234 million sales in the second quarter. Sales increased 76% year-over-year, primarily driven by uptake of the prefilled single-use pen. We see strong growth opportunity for TEZSPIRE given its unique differentiated profile and its broad potential to treat the 2.5 million patients worldwide with severe uncontrolled asthma.

Otezla sales decreased 9% year-over-year for the second quarter with 2% volume growth offset by lower net selling price and unfavorable changes to estimated sales deductions. In the U.S., we saw a 3% year-over-year growth in new patient prescriptions in the quarter, driven by strong execution by our dermatology sales force and increased Otezla direct-to-consumer media activity. We've seen an increasingly competitive environment in dermatology with the introduction of novel topicals and new biologic treatments. Otezla retains an important role in this landscape given its broad label, safety profile and unique positioning as a first systemic treatment for patients with cirrhosis.

Enbrel sales decreased 15% year-over-year for the second quarter, primarily driven by lower net selling price. Going forward, we expect continued declining net selling price and relatively flat volumes. Enbrel is known for its efficacy and trusted by physicians. It's substantial health benefits and cash flow generation provide a solid foundation for our business.

Turning now to biosimilars, where sales of our biosimilar products were relatively stable year-over-year for the second quarter. We're positioned for future growth with upcoming launches, with Lana, a biosimilar to STELARA and Becenbia biosimilar to Soliris, are both expected to launch in the U.S. in Q1 of 2025. Our vertically integrated biosimilar business model ensures efficiency and provides attractive cash flows and returns for our shareholders.

In oncology, sales of our 7 innovative products, BLINCYTO, LUMAKRAS, Vectibix, KYPROLIS, Nplate, XGEVA and IMDELLTRA grew 12% year-over-year for the second quarter, driven by volume growth and higher net selling prices. In total, these products contributed almost $2 billion of sales in the second quarter.

BLINCYTO sales grew 28% year-over-year to $264 million for the second quarter, driven by broad prescribing across academic and community segments for patients with B-cell ALL. BLINCYTO was recently granted approval by the U.S. Food and Drug Administration as a frontline consolidation treatment for patients with Philadelphia chromosome-negative B-cell ALL. Our commercial and medical teams are engaging key academic, regional and community customers in establishing BLINCYTO as a standard of care in this setting.

LUMAKRAS sales increased 10% year-over-year to $85 million for the second quarter. We see future growth opportunities for LUMAKRAS coming from launches in new markets and additional indications. Back to back sales increased 9% year-over-year to $270 million for the second quarter, now annualizing at over $1 billion. We also drove strong performance of KYPROLIS, which grew 9% year-over-year and end plate, which grew 12% year-over-year.

Since our U.S. launch of IMdelta in mid-May, we generated $12 million of sales in the second quarter. IMDELLTRA was recently approved for the treatment of adult patients with extensive stage small cell lung cancer with disease progression on or after platinum-based chemotherapy. We're seeing strong clinical conviction in IMDELLTRA in both academic and community settings. And while very early in the launch, we're encouraged by the adoption of IMDELLTRA and look forward to its potential to bring new possibilities to patients living with this aggressive disease. I'm pleased with our execution in the quarter, driving accelerated performance for our most important growth brands.

And with that, I'll turn it over to Vikram, who will cover our Rare Disease portfolio.

[Vikram Karnani, executive]

Thank you, Murdo. I am pleased to provide an update on rare disease which delivered product sales of over $1.1 billion in Q2. Beginning with TEPEZZA for the treatment of thyroid-eye disease, second quarter sales were $479 million, reflecting growth of 8% year-over-year and 13% quarter-over-quarter, when compared to results from the legacy Horizon business.

Recall that there are roughly 100,000 TED patients in the U.S., and penetration is currently only in the single digits. The main growth opportunity is within the roughly 80% of TED patients who have a low clinical activity score or CAS. We are expanding our reach among new prescribers, particularly ophthalmologists and endocrinologists who manage many of the low cash patients who can benefit from TEPEZZA. The impact of thyroid-eye disease on quality of life is often underestimated. So our focus is on educating health care providers about the significant effects on patients, even those with less visible symptoms.

In addition, we are increasing our strategic focus in endocrinology with a dedicated sales force to engage in this important space. We are also making significant strides in improving access. Thanks to the recognition of TEPEZZA's efficacy by payers, to date, we have achieved favorable medical policy changes for greater than 55% of U.S. covered lives, compared to 50% last quarter and just 5% roughly 1 year ago. We expect to continue this momentum throughout 2024.

International expansion remains a meaningful long-term growth opportunity for TEPEZZA with regulatory filings complete or underway in multiple geographies. With Japan as the next significant launch expected by early 2025. We also initiated a Phase III subcutaneous study and see this as an opportunity to increase adoption and improve the patient experience with an alternative option to our current IV formulation.

KRYSTEXXA for patients with chronic refractory gout, delivered $294 million in sales in Q2, representing 20% year-over-year growth driven by volume growth from strong commercial execution. KRYSTEXXA with immunomodulation continues to redefine the standard of care for uncontrolled gout.

UPLIZNA, for patients with neuromyelitis optica spectrum disorder, or NMOSD, delivered $92 million in sales in Q2, representing 35% year-over-year growth. International expansion of UPLIZNA is also underway with launches in multiple ex U.S. markets, including Canada, which launched earlier this year. In addition to NMOSD, we are excited about the impressive Phase III results with UPLIZNA in IgG4-related disease. And the potential it has to address a debilitating condition that impacts more than 20,000 patients in the U.S. We also look forward to the Phase III readout for UPLIZNA in [indiscernible] later this year. Jay will address these in more detail in a moment.

Sales of TAVNEOS were $71 million for the second quarter. Sales increased 137% year-over-year driven by volume growth. In the U.S., more than 3,500 patients with ANCA-associated vasculitis have been treated with TAVNEOS. Over 2,300 health care professionals have now prescribed TAVNEOS, a roughly 35% increase in the prescriber base so far this year. The integration of the legacy Horizon business is progressing nicely as we leverage Amgen's leadership in inflammation, world-class manufacturing and process development and extensive global footprint.

Now I will pass it over to Jay for our R&D update.

[James Bradner, executive]

Thank you, Vikram, and good afternoon, everyone. In the second quarter, we rapidly advanced our broad clinical pipeline of potentially first-in-class or best-in-class programs. We received 2 approvals in the quarter, a breakthrough therapy designation and delivered exciting clinical data for many programs, while eagerly awaiting additional data readouts later this year.

Let's begin with general medicine. As previously mentioned, based on the interim analysis, we are seeing a differentiated profile with MariTide and are confident it will address important unmet medical needs in obesity, obesity-related conditions and Type 2 diabetes. We remain on track and look forward to top line 52-week data from the ongoing MariTide Phase II study in late 2024.

We are actively planning and expect to initiate a broad Phase III program in obesity, obesity-related conditions and diabetes, along with a Phase II trial investigating MariTide for the treatment of diabetes in patients with and without obesity. Beyond MariTide, we continue to progress our early obesity programs that consists of both oral and injectable incretin and non-accreting approaches.

We expect one of these programs to enter clinical development later this year. Also in Gen med is Olpasiran, our potentially best-in-class Lp(a) targeting small interfering RNA medicine, the fully enrolled Phase III cardiovascular outcomes trial of Olpasiran continues to progress. To remind, Lp(a) is a genetically defined cardiovascular risk factor that is elevated in approximately 20% of individuals and for whom no effective or targeted therapies currently exist.

In oncology, we continue to deliver on high conviction targets with differentiated therapies capable of delivering transformative clinical benefit for patients. Let's begin with IMDELLTRA, a first-in-class bispecific T cell engager or BiTE molecule targeting DLL3 for small cell lung cancer. We're very pleased that the FDA granted accelerated approval to IMDELLTRA for the treatment of adult patients with extensive stage small cell lung cancer with disease progression on or after platinum-based chemotherapy.

Further, we are pleased that the NCCN guidelines have been updated to include IMDELLTRA as a preferred option for patients with a chemotherapy-free interval less than or equal to 6 months and as an other recommended treatment option for patients with a chemotherapy-free interval greater than 6 months. Based on the remarkable activity observed as a single agent in patients receiving second and third-line therapy, we are rapidly advancing IMDELLTRA into frontline therapy with 3 Phase III studies underway in both extensive and limited stage disease.

One of these studies, DeLLphi- 304, our confirmatory Phase III study in second-line small cell lung cancer has completed enrollment. Notably, IMDELLTRA is the first bispecific T cell engager approved to treat a common solid tumor. The present study of tarlatimab in earlier lines and in the context of lower tumor burden, draws from our experience with our first approved bispecific T cell engager BLINCYTO and B-cell acute lipoblastic leukemia.

Here, we observed a dramatic improvement in overall survival in minimal residual disease negative patients, along with improved tolerability. These BLINCYTO data provide evidence that directing the T cell in this manner is an effective means of finding and eliminating residual cancer cells that are drivers of occurrence.

This June, based on the profound survival benefit observed in the treatment of frontline disease, the FDA approved an additional indication for BLINCYTO for the treatment of adult and pediatric patients 1 month or older with CD19 positive, Philadelphia chromosome negative, B-cell ALL and the consolidation phase of treatment, here regardless of minimal residual disease status. We continue to seek to expand the impact of BLINCYTO in newly diagnosed B-ALL through ongoing studies and with the further investigation of subcutaneous administration.

Our first-in-class STEAP1 CV3 bispecific molecule, zalaritomig, has also demonstrated profound clinical activity in metastatic castrate-resistant prostate cancer, importantly, demonstrating our ability to target a second common solid tumor with a bispecific T-cell engager therapy. We are rapidly advancing this program and have now fully enrolled the monotherapy Phase I dose expansion as we continue to enroll patients in reduced monitoring and outpatient cohorts.

Further, we are advancing the study of zalaridimig earlier in the prostate cancer treatment paradigm with combinations of zalaridamig and enzalutamide or abiraterone ongoing while we plan additional studies in earlier disease settings.

In sum, we regard IMDELLTRA, BLINCYTO, ZALARIDAMIG as major advances, further establishing the broad potential of our leading bispecific T cell engager platform. To round out oncology, we have completed enrollment of FORTITUDE 101, a Phase III study of bemarituzumab a first-in-class fibroblast growth factor receptor IIb directed monoclonal antibody administered in combination with chemotherapy in frontline gastric cancer.

We are also rapidly advancing AMG 193, our oral PRMT5 inhibitor developed for MTAP no solid tumors as both a monotherapy and in combination with other therapies. Additional data from the Phase I dose escalation and initial dose expansion study of AMG 193 in patients with MTAP solid tumors will be presented at ESMO in September.

Lastly, we are pleased also to share that the FDA has granted an orphan drug designation to AMG 193 for the treatment of pancreatic cancer. Turning to inflammation. We are encouraged by the data arising from our Phase II study of TEZSPIRE in patients with moderate to very severe COPD. Together with AstraZeneca, we are actively planning for Phase III development in COPD.

We are also pleased to announce that the FDA recently granted TEZSPIRE, a Breakthrough Therapy designation as an add-on maintenance treatment of patients with moderate to very severe COPD, characterized by the eosinophilic phenotype. Beyond COPD, we continue to explore TEZSPIRE in separate Phase III studies in eosinophilic esophagitis and in chronic rhinosinusitis with nasal polyps, where top line data are expected later this year.

Turning to rocutinlumab a first-in-class T cell rebalancing monoclonal antibody targeting OX40 receptor. The comprehensive rocutinlimab Phase III ROCKET program has successfully enrolled over 3,100 patients with moderate to severe atopic dermatitis. Five of the 8 studies are now fully enrolled. The Phase III HORIZON study, part of this ROCKET program evaluates rocutinlumab monotherapy versus placebo in adults with moderate to severe atopic dermatitis. And it is ongoing with data readout anticipated in H2.

Beyond atopic dermatitis, we continue to explore the potential of rocutinlumab in additional indications and have initiated a Phase II study in moderate to severe asthma as well as a Phase III study in Perrigo nodularis.

Shifting to rare disease, we are encouraged by the advancements of our rare disease pipeline with several mid- to late-stage opportunities. UPLIZNA, a CD19 B-cell depleting therapy offers a differentiated mechanism of action than other autoimmune therapies, durable efficacy with a convenient every 6-month IV dosing schedule. This could be very important for chronic inflammatory diseases.

Recently, we were excited to announce positive top line results from a Phase III clinical trial evaluating the efficacy and safety of UPLIZNA for the treatment of immunoglobulin G4 related disease. The trial met its primary endpoint, showing an astonishing 87% reduction in the risk of IgG4-related disease flare, as compared to placebo during the 52-week placebo-controlled window. All key secondary endpoints were also met and no new safety signals were identified. This is the first randomized controlled trial to demonstrate efficacy in the IgG4-related disease patient population. Regulatory filing activities are underway and full data from the trial will be presented at a future medical meeting.

We are also studying a UPLIZNA in generalized myasthenia gravis through the ongoing Phase III MINT study. The MINT study is evaluating the efficacy and safety of UPLIZNA in patients with generalized myasthenia gravis, who are of a comparable disease severity and a comparable treatment experience to other recently approved biologic therapies. We are investigating UPLIZNA in the 2 predominant antibody serotypes that drive this disease, acetycholine receptor positive and in muscle specific tyrosine kinase positive patients.

MINT is the only trial attempting to demonstrate efficacy while removing the treatment benefit of steroids. Patients in the MINT trial who entered on steroids had a protocol specified paper by 24 weeks. We look forward to data readout in the second half of 2024. To expand the impact of our CD19 directed therapeutics to even more patients suffering from serious inflammatory diseases, compelled by both biological inferences and insights from small studies of CD19-directed therapies, we are launching a development program targeting CD19 positive B cell-mediated autoimmune disease with UPLIZNA and blinatumumab.

This is an exciting and promising space with Amgen's strong capabilities in inflammatory disease and 2 well-characterized assets, we are very well positioned to lead in this rapidly advancing field. We will have more to say about these programs in due course. .

Lastly, in May, the FDA approved [ MacemVY ] as the first interchangeable biosimilar to SOLIRIS or eculizumab. Also in biosimilar development, registration-enabling studies are underway for ABP 234 and a biosimilar candidate to KEYTRUDA and ABP 206, a biosimilar candidate to Opdivo.

In closing, I'd like to thank my Amgen colleagues for their strong sense of service to patients facing serious illness, their intense focus and spirited collaboration during this momentous year and their commitment to growing the impact of both our research and our business through this portfolio of potential first-in-class and best-in-class medicines.

I'll now turn it over to Peter.

[Peter Griffith, executive]

Thank you, Jay. We're pleased with our strong second quarter performance and are on track with our 2024 full year goals and [indiscernible] Objectives. We have a strong long-term growth outlook across our 4 therapeutic areas, driven by the breadth and depth of our innovative pipeline and in-market products, serving patients with serious illnesses around the globe. .

Starting with our second quarter results, as shown on Slide 27 of the slide deck, we delivered $8.4 billion in total revenue, a 20% increase year-over-year. It's the highest quarterly revenue in Amgen history, achieved with 26% volume growth. This means more patients than ever are receiving Amgen medicines. Excluding the addition of Horizon product sales increased 5% year-over-year, driven by 10% volume growth.

In the second quarter, we delivered a non-GAAP operating margin of 48.2% as a percentage of product sales with total non-GAAP operating expenses increasing 30% year-over-year. Non-GAAP cost of sales as a percent of product sales increased 0.4 percentage points on a year-over-year basis, primarily driven by higher royalties and profit share due to changes in sales mix. Non-GAAP R&D spending in the second quarter increased 30% year-over-year as we strategically invested in the late-stage pipeline, including MariTide, rocatinlumab and bemarituzumab as well as Horizon acquired programs.

Non-GAAP SG&A expenses increased 36% year-over-year, primarily driven by the addition of Horizon. Excluding the addition of Horizon, non-GAAP SG&A expenses increased 14% year-over-year, driven by investment in Repatha, Otezla and EVENITY. Our non-GAAP OI&E resulted in a $700 million expense, up $400 million year-over-year, almost entirely due to increased interest expenses from the Horizon acquisition. We remain on track to deleverage with line of sight to retiring greater than $10 billion of debt by the end of 2025. This includes $1.4 billion of debt retired in the second quarter and $2.0 billion year-to-date.

Our non-GAAP tax rate decreased 1.5 percentage points year-over-year to 14.9%, primarily due to the change in sales mix from the inclusion of our Horizon. In the second quarter [indiscernible] free cash flow, a decrease of $3.8 billion -- a decrease from $3.8 billion in the previous year, driven by the timing of tax payments. In [ 2023 ], patriation tax were made in the fourth quarter. Whereas in 2024, these payments were made in the second quarter. The Horizon integration is progressing well, and we expect to reach $500 million in pretax synergies by year 3 post acquisition, with roughly 50% to be realized by the end of this year.

We expect accretion to non-GAAP earnings per share in 2024. We continue to execute on our capital allocation priorities. We're investing in the best innovation, both internally and externally to rapidly advance an innovative pipeline, multiple potentially first-in-class and/or best-in-class medicines across the 4 therapeutic areas. As I said earlier, this is reflected in our second quarter non-GAAP R&D spend of $1.4 billion, an increase of 30% year-over-year.

Second, we continue investing in our business for long-term growth. We are expanding capacity in our state-of-the-art manufacturing facilities, including investments to support MariTide. Beyond manufacturing, we are opening a new global technology and innovation center in Hyderabad, India, which will attract talent at scale and accelerate digital capabilities across the organization, including artificial intelligence, data science, life science and medical.

And third, we returned capital to shareholders as we paid competitive dividends of $2.25 per share in the second quarter. This represented a 6% increase compared to 2023. Turning to the outlook for the business for 2024 on Slide 29. We expect our 2024 total revenues in the range of $32.8 million to $33.8 million in non-GAAP earnings per share between $19.10 and $20.10.

I will mention a few considerations as you model the remainder of 2024. On revenues, we expect mid-single-digit growth quarter-over-quarter in the fourth quarter compared to Q3. Our full year non-GAAP R&D expenses are now expected to increase more than 25% year-over-year as we further invest in our late-stage pipeline to support multiple late-stage studies underway across all therapeutic areas. As a result, we now project the full year non-GAAP operating margin as a percentage of product sales to be roughly 47% with Q3 operating margin lower than Q2.

Total non-GAAP operating expenses for the third quarter are expected to grow at a similar rate to the first 2 quarters of this year. We expect OI&E to be approximately $2.5 billion, which includes the interest expense related to the [ $28 billion ] of debt raised for the Horizon acquisition. We continue to expect the non-GAAP tax rate to be in the 15% to 16% range, including the full year benefits associated with the inclusion of the Horizon business. As we have previously indicated, we have initiated activities to further expand MariTide manufacturing capacity.

To support these initial efforts, we now expect capital expenditures of $1.3 billion in 2024 versus our most recent guidance of $1.1 billion to $1.2 billion. Our long-term outlook remains robust, and I am grateful to our 27,000-plus colleagues worldwide for their dedication to [indiscernible] patients. This concludes our financial update.

We will now begin our Q&A session. Julianne, please remind our participants of the process. Thank you.

[Operator]

[Operator Instructions] our first question comes from Yaron Werber from TD Cowen.

[Yaron Werber, analyst]

Jay, maybe a question for you, actually. I want to start with the UPLIZNA. And we noticed a few things. The MINT study was supposed to have complete completion around mid-May. And Amgen just posted a whole bunch of new job postings for [indiscernible] and you have a slot on October 15 at the MGFA to present the data. As you noted, you're doing steroid tapering. It's a different trial design, but you also did steroid tapering and the other 2 indications, NMO and IgG 4. Can you talk a little bit sort of what are you hoping to see and what are you expecting to see from the data?

[James Bradner, executive]

Thank you, Yaron, for the question, and for following the program so closely, we're very excited about UPLIZNA, the CD19 B-cell depleting monoclonal antibody is showing really remarkable activity, the results in IgG4-related disease is a bellwether is quite dramatic with a hazard ratio of 0.13 a P value of what, 5 to the minus seventh. This was a stunning result and the first positive Phase III for patients with IgG4-related diseases.

As you nicely picked up in your question, one of the opportunities of UPLIZNA is to get patients off steroids, and this is, therefore, a predefined ambition of UPLIZNA in both IgG4-related disease setting in that study as well, as in the generalized myasthenia gravis setting. Now these results won't be available until the second half of this year. And so I have no further update on that timing. But do stay tuned. We're so hopeful that this once every 6 months [ CD19 ] B-cell depleting therapy can differentiate substantially from available treatments like steroids and other B-cell targeting therapies and make a big difference for these patients.

[Operator]

Our next question comes from Salveen Richter from Goldman Sachs.

[Salveen Richter, analyst]

Just following up here on Yaron, could you speak to the clinical bar for UPLIZNA and myasthenia gravis, both on a placebo-adjusted basis and also on an absolute basis, given the notable steroid taper, which I believe the other therapies did not have included in their design. And with regard to this MGFA scientific session meeting, should we expect top line results before that presentation?

[James Bradner, executive]

Thanks, Sophie. As I just mentioned to Yaron, we won't be providing further guidance on the timing of the results from the UPLIZNA study, the MID study in myasthenia gravis of [indiscernible]. And as also, as shared knowing that patients with myasthenia gravis are repeatedly and over many, many months of treatment challenge by the requirement for persistent steroids, we built in a taper steroids on to this study. And these results to read out in the second half of this year will bring to light exactly how successful we are at liberating patients from steroids with every 6 months UPLIZNA.

[Operator]

Our next question comes from Evan Seigerman from BMO Capital Markets.

[Evan Seigerman, analyst]

Well, not a huge growth driver. I'd love if you could characterize on some of your negotiations with CMS on Enbrel. Many of your peers are pleased with kind of the fair price that they negotiated with CMS. Do you feel the same way? I'd also love to know how you're seeing about the impact of Part D redesign.

[Murdo Gordon, executive]

Thanks, Evan, for the question. It's Murdo here. Overall, Enbrel continues to do well in the market despite a very competitive market in psoriatic arthritis and in rheumatoid arthritis. We also continue to have relatively stable volume despite all of the conversion that's going on in adalimumab with biosimilars. So we're quite pleased with prescribers adoption and continued value of Enbrel safety and tolerability, which is well established over a long period of time now in many, many years of experience.

The process with CMS has concluded. We do have our price. I would just remind you that roughly 25% of Enbrel revenues come from Medicare Part D. So that will, in part, mitigate the impact of the CMS price reduction. And we continue to see that this is not a good mechanism to incentivize and reward innovation and it does not resemble one we've commonly described as a negotiation.

So we've concluded that process. And we continue to look to help patients and support them with Enbrel in the market and we will watch the Part D redesign closely. We will look to see how PBMs redesign their formularies, and we will look to see how patients are impacted by the new model. While the cap may help the out-of-pocket for many patients may actually rise. So we're watching it closely.

[Operator]

Our next question comes from Mike Yee from Jefferies.

[Michael Yee, analyst]

Pivoting to obesity. I know that you are on track for data later this year for the injectable product which you claim as differentiated as other competitors have moved quickly both with their programs with injectables, but also oral multiple companies are putting well. Can you just comment about how you feel about your positioning in this space, given others have multiple products moving to late stage and how you feel you can position yourself here, given just for [ 33 ].

[James Bradner, executive]

Thanks, Mike. Why don't I get started in Murdo, perhaps you could add on at the end. We are very pleased with the results that we've seen at the interim with the overall conduct of the Phase II study. Though there's been no further analysis since the interim as of the interim all the arms were active, dropout had not been an issue. And -- we saw a differentiated profile with MariTide and remain confident that this medicine can address significant important unmet medical need and obesity, obesity-related conditions and, in particular, Type-2 diabetes, as shared earlier in the call.

There's no question that there is quite a democratized and broad base of innovation in this space. And potentially oral medicines could serve to address some of that still vast and remaining unmet need, and we follow these programs very closely. Still, the development of MariTide is advancing very briskly, as we now move to rapidly initiate a broad Phase III program. And we remain confident in what MariTide offer for patients with obesity-related conditions as well as diabetes. Murdo?

[Murdo Gordon, executive]

Yes. Thanks, Jay. I think the data continue to emerge in the obesity and obesity-related conditions landscape and show a clear benefit that reducing weight will indeed with GLP-1-based mechanisms will indeed improve outcomes in many disease settings. So that continues to expand the market and grow it.

I do agree with Jay that there will be patients who may seek oral options but I continue to believe that we have a very good differentiated product here and that monthly dosing or even less frequently will continue to help patients persist on their weight loss medication and achieve, hopefully, some of those hard endpoint risk reductions that we're seeing in clinical trial presentations. I would say that we would report that we have a really good convenient dosing here with a single-use pen that we're working on. And that weekly injectable products are probably more vulnerable to orals than a convenient monthly dosing.

[Operator]

Our next question comes from Umer Raffat from Evercore ISI.

[Umer Raffat, analyst]

I wanted to focus on MariTide, if I may. A 2-part question. First, it looks like your competitors are moving forward to Phase III on either smaller data sets or lesser further along from a Phase II, Phase III perspective. Just curious why you thought you definitely needed 52-week data? Was that mostly conservatism? Or is that some FDA feedback as well? And then also on CapEx, I feel like the $150 million guidance increase seems relatively trivial, but it does imply CapEx being up 80% over first half. Could you please expand on whether it's API related or something else you have in mind?

[James Bradner, executive]

Yes. Thanks. Why don't I start on on the overall development plan for MariTide and the value of the Phase II data that we'll have at the end of this year. Umer, as you know, this medicine coming out of Phase I showed a quite remarkable impact on obesity with a dramatic reduction in BMI, actually proved quite durable after just 3 doses, MariTide in that Phase I study, we saw persistent weight loss really out 150 days or more at some doses.

The Phase II study is a much larger concern. This is a 592 patient study. It has 11 arms at test, monthly or as Murdo said, even less frequent dosing. As a part 2 that allows us to really follow up on this durability signal, and it will allow the precision selection of dose or doses that patients and their practitioners really desire. This also informs to regulatory requirements entering into Phase III.

[Peter Griffith, executive]

Umer, it's Peter on CapEx, as we previously indicated, we have initiated activities to further expand MariTide manufacturing capacity. So of course, those efforts, I said we now expect CapEx of $1.3 billion in '24 versus the most recent guidance, which was $1.1 billion to $1.2 billion.

[Operator]

Our next question comes from Jay Olson from Oppenheimer.

[Jay Olson, analyst]

Congrats on all the progress, especially in your BiTE platform. Can you talk about any feedback you're getting from clinicians on the IMDELLTRA launch and potential lessons learned from BLINCYTO that you can leverage for IMDELTRA, especially since you're launching BLINCYTO now in B-ALL and developing a subcu formulation?

[Robert Bradway, executive]

Take it in a couple of parts here. Murdo, do you want to share what we're learning from the launch?

[Murdo Gordon, executive]

Yes. Thanks for the question, Jay. Obviously, it's very early given that this was a mid-May approval, but I have to say we are extremely pleased with how both thought leaders and community oncologists are receiving IMDELLTRA in the market. Their clinical conviction is very high. They are moving quickly to establish care pathways for these patients given the monitoring requirement for IMDELLTRA. And this is -- this disease setting, as you know, is a really difficult disease setting. Patients can progress relatively rapidly after platinum-based chemotherapy in the front line.

And so we're obviously moving very quickly with our medical teams, our account management teams and our sales organization to build rapid awareness and to help both academic and community oncology accounts, be able to treat patients easily and safely and have the appropriate settings for care follow-up. So very early, but this product is seen as a major transformation in this disease setting. Jay?

[James Bradner, executive]

Yes. Thanks for the question, Jay. You picked up on something really interesting, and that's leveraging the learnings of BLINCYTO. I mean this really is a platform capability that we enjoy with bispecific T-cell engagers. And already in the development of IMDELLTRA after its first approval, we are seeing significant readthrough of the BLINCYTO lessons, moving from later lines of therapy to earlier lines of therapy, to drive efficacy in the setting of reduced tumor burden.

The utility of these medicines in combination, which is so much easier to access and assess than other complex modalities, say, like CAR T and and moving these medicines to the point of therapy where they can have the greatest impact, namely frontline, also pathways to reduce monitoring. Jay, we are leveraging all the learnings of BLINCYTO to drive and expedite the development of IMDELLTRA to be a component of frontline small cell lung cancer therapy, both with extensive stage and limited stage disease. And as Murdo shared, we do this work really quite inspired by the impact of the medicine, even so early in its launch, significant demand to learn and access and offer this medicine.

[Robert Bradway, executive]

And Jay, I'd just add that when it comes to [indiscernible] I think you're question applies well there, too. So stay tuned. We'll talk more about [indiscernible] data emerge, but we're optimistic about how we can apply the lessons of BLINCYTO and IMDELLTRA to that as well.

[Operator]

Our next question comes from Mohit Bansal from Wells Fargo.

[Mohit Bansal, analyst]

I have a question for Jay. Again, on MariTide. Is there any reason to think that MariTide may or may not exhibit a different profile versus [indiscernible] On parameters such as lipid blood pressure or cDactive protein? And how important is benefit on those parameters while you design your Phase III trial, something like outcomes trial or not ?

[Murdo Gordon, executive]

Yes. Thank you, Mohit. I can surely understand the interest. And indeed, we are making all these measurements and more we won't dimensionalize what we mean when we say differentiated profile at this time. We're so focused on completing this ongoing and well-conducted MariTide Phase II study, but do expect to learn and listen more when ultimately, we're able to be in a position to share the outcomes of Part A of the Phase II study. We are taking a comprehensive assessment to optimize dose and schedule and impact of this medicine.

[Operator]

Our next question comes from Gregory Renza from RBC Capital Markets.

[Gregory Renza, analyst]

Congratulations on the quarter. My question is just on the obesity franchise. As you and the team had mentioned to expect one of the early obesity programs to enter clinical development later this year. Just curious if you could elaborate on what lens you're using to nominate that first or that next program? I'd imagine it's rather complex in the assessment and any color you have on determining that choice and how to take that forward would be great.

[James Bradner, executive]

Gregory. Thank you. This is Jay, and thanks for following the early pipeline in its development. It's developing very nicely. As we've shared our strategy in the development of obesity medicines and medicines for obesity-related conditions. We're interested in really harvesting the insights of the incretin pathway, but also moving beyond this pathway to other novel targets, some supported by genetic inferences, but all of them supported by strong preclinical development packages.

And so it is a multifactorial assessment that leads to the decision to resource the medicine in human clinical investigation. But it's a high degree of conviction that's required as the bars are ever rising within our portfolio for that resource as well as in the field. So more to follow on the mechanism and characteristics of this new medicine that we're intending to advance in the clinical investigation in the second half of this year.

[Operator]

Our next question comes from Chris Raymond from Piper Sandler.

[Christopher Raymond, analyst]

And if I may, another obesity question. Just on MariTide, and I've heard you guys now talk for a long time about planning for a broad Phase III program. But I don't think you guys have ever talked even in generalities, when exactly this will happen. Can you maybe give a range here for when you anticipate kicking off enrollment in that program?

[Robert Bradway, executive]

Chris, as you can expect, we're focused now on completing the Phase II trial and moving as swiftly as appropriate into Phase III. So we'll have more to say that over the course of the coming year. You can appreciate it's a competitively intense field. So we're not giving dates at this point.

[Operator]

Our next question comes from Carter Gould from Barclays.

[Carter L. Gould, analyst]

For Peter, on August 2, the U.S. Tax Court entered a decision against Coke. Their litigation was often referenced as sort of the best benchmark for sort of what you're facing appreciating that you took the deposit earlier this year, but why shouldn't there be read through from that case? And maybe you could speak to your overall confidence in the outcome.

[Peter Griffith, executive]

No. Thank you very much for the question, Carter. Nothing has changed in our evaluation of the case. Court dates set for November 4. We're confident in our position, right, where we've always been. We're confident in our reserves are at an appropriate level. And -- what I would say is, first of all, I don't see -- and Coke hasn't been as much a reference and I won't get into making comparisons. We refer once in a while to the Medtronic situation.

But in general, what we've seen is that the tax court in the last several years has reinforced the value of manufacturing down in Puerto Rico. And so we look forward to stating our case. We're very confident where we're at. And that's all we've got to say at this time. No change. We're at where we were in terms of confidence, which is in the same place for the last 2.5 or 3 years now.

[Operator]

Our next question comes from Terence Flynn from Morgan Stanley.

[Terence Flynn, analyst]

Peter, another one for you here. I appreciate the incremental guidance on CapEx, but just was wondering if you could speak directionally about margins in 2025, given the likely scope of the MariTide obesity program.

[Peter Griffith, executive]

Terence, we don't -- as you know, we don't guide long-term margins, but let me just comment on what you're seeing this year. I'm happy to speak to that. And I think it's important. We're at Amgen, we're committed to a capital allocation hierarchy, where we first invest in innovation and first internal innovation. And so with that in mind, Terence, we've consistently said that we would flex up margin, which remember, with us, as a percentage of product sales, not revenue, if there were opportunities to achieve strong after-tax cash returns on our investment in excess of our hurdle rate.

And then we would communicate that ahead of time. So this year, we shared with you at the beginning of the year, we felt operating margin to be about 48%. We see an opportunity here during the year to make some investments in the research and development activities with an emphasis, I would say, on development. That's up 30% year-over-year in the quarter, non-GAAP R&D.

We now see non-GAAP R&D spend up over 25% year-over-year for '24, which we think is great because you've heard about the deep mid- and late-stage pipeline we have, driving MariTide in that deep mid- and late-stage pipeline. We're always focused Terence, whether it's this year or next year on productivity and prioritization, always looking for opportunities to generate capital to allocate the innovation. We've got a new program called technology and workforce strategy that we're moving along at speed and scale. I spoke about opening a new talent innovation center in Hyderabad, India. But we are doing everything we can to preserve that margin, reallocate capital innovation and be the disciplined spenders of capital that Amgen always has been.

[Operator]

Your next question comes from Chris Schott from JPMorgan.

[Christopher Schott, analyst]

Just had a question on MariTide and your plans in that Phase II diabetes study. Company, obviously, very excited about the broader opportunity for the drug, but it does seem like diabetes is a more established market with maybe less of the capacity constraints than we've see in obesity. So can you just talk a little bit about what you think you need to see to be able to compete here in dislodging [indiscernible] can you also confirm that the study is not needed to move forward in the Phase III obesity studies, or it's just a completely separate program related to the diabetes piece of things?

[Robert Bradway, executive]

Can take this in 2 pieces again. Jay, why don't you address the first piece and then Murdo feel free to jump in.

[James Bradner, executive]

Yes, absolutely. As you nicely identified later this year, we will initiate an additional dedicated Phase II study that will characterize MariTide from the treatment of diabetes in patients with and without obesity. And this new study is not a gating step at all for the Phase III program for patients with obesity, but conforms to regulatory guidance and importantly, allows us to optimize dosing for the diabetic patients, where medically, I can say [indiscernible] , your considerable perspective, I'm unaware of a highly efficacious monthly or less frequently administered medicine for the treatment of diabetes. Murdo?

[Murdo Gordon, executive]

Yes. Thanks, Jay. I would agree with you that the differentiation that we've talked about for chronic weight management would hold in a robust way in type 2 diabetes. And while there are lots of products that can control hyperglycemia and provided HbA1c control, there is a significant benefit if you can improve adherence and persistence. And we do believe that our monthly dosing could do that.

[Operator]

Our next question comes from Kripa Debora Conda from Truist Securities.

[Unknown Analyst]

Another obesity question, but slightly tangential. I'm not sure if you've talked about this before, but there's been a conversation about muscle preservation in people who are losing weight on [indiscernible] . Have you evaluated this aspect with MariTide? Do you see this being the problem broadly in the space? And -- if so, where do you think MariTide would fit into that landscape?

[Robert Bradway, executive]

Sure. Jay, why don't you jump in there?

[James Bradner, executive]

Sure. No, thank you for your question. As you apparently do as well, are following this class and class of medicines that provoke remarkable weight loss or the impact on healthy tissues, including but not limited to muscle, and the associated muscle loss that has been reported in the literature may relate mechanistically and may also relate to the quite dramatic cadence of weight loss of patients treated with these medicines.

And in the fullness of time, we and others will have that answer. As you can imagine, we're making many of these measurements on our own study and don't have any report -- any data to report to you here today, but we too are following this. And also the progress of some organizations that are seeking to administer medicine to support muscle loss with obesity medicines that is quite interesting to us given our legacy of muscle biology. But I would say these are early insights from the field. To my knowledge, they have not proven has yet to be debilitating to the patient, but we like you follow with interest.

[Justin Claeys, executive]

Julian saying we're getting to the top half of the hour here. Maybe we'll just take 2 more questions.

[Operator]

Our next question comes from James Shin from Deutsche Bank.

[James Shin, analyst]

For the next obesity asset that's entering clinics later this year, can you specify whether this asset is aimed to fill in for [ 786 ], and whether there's no next obesity acid will work in tandem with [ 130/30 ] ?

[James Bradner, executive]

Thanks, James. We won't today provide any further insight into this medicine. It's just too early. And as Bob shared, this is nicely for patients, a very competitive space. But as I shared earlier, in our deeper pipeline, obesity. We remain interested in the increasing pathway. We remain interested injectable. We're also pursuing oral medicines. And so in the fullness of time, we'll have a chance to share more. We're really playing the long game to drive true differentiation benefits to the patient and to access segments of the market that are not well addressed even by the current medicines.

[Operator]

Our last question will come from Gary Dockman from Raymond James.

[Gary Nachman, analyst]

So shifting to TEPEZZA. When do you think we'll see more of an acceleration in the low CAF patients? How has reimbursement been improving for those patients? And describe how much the Japanese opportunity could help next year? And then just talk about the overall resources you're putting behind TEPEZZA and the rest of the rare disease portfolio that obviously, a much bigger focus for you now, if that continues to ramp up at what pace and when you might get more operating leverage from that rare disease business?

[Robert Bradway, executive]

A lot of questions there, Gary, but why don't we take it in a couple of pieces. Go ahead, Vikram.

[Vikram Karnani, executive]

Yes. So thanks for the question, Gary. Look, we're pretty pleased with how we've been executing on TEPEZZA this year and driving it towards growth. As you rightly observed, there are a significant number of low CAS patients or low clinical activities for patients that are suffering from this disease who are not being appropriately treated. And specifically, that's about 80,000 out of the 100,000 addressable patients in the U.S. .

What we have been doing is seeing significant momentum on expanding our prescriber base, which now in addition to ocuplastic surgeons also includes ophthalmologists and endocrinologists. And this is a really important element here. The strategic focus in endocrinology is really important so that we can serve those low CAS patients, the low CAS patients favorably. You asked about improving access. To date, we have achieved favorable medical policy changes for greater than 65% of U.S. covered lives.

And if you compare that to 50% last quarter and just over 5% about a year ago, I think we've made pretty good progress in enabling patient access using our Phase IV data that have become available last year. So we continue to see a significant growth opportunity for TEPEZZA in the U.S. while also recognizing that as we make progress with a lot of our execution efforts, there continues to be a time lag between when we knock down barriers for access, expand our prescriber base and see patients get on therapy.

[Robert Bradway, executive]

In Japan, Gary, we expect that they'll be, again, an attractive market and this will be well received in that country, and we'll talk about that once we've launched there during the course of next year.

With respect to leverage, I think I would just offer that we're on track. With respect to our synergy targets there, and we'll begin to get even more leverage as we're able to take full control of the supply chain for the rare disease products. And then I would just further observe, as we've said many times, that feel fortunate that there's a good overlap between some of our existing capabilities in sales and marketing and the needs of those rare disease products.

So all in all, we remain really excited about what we're able to do for rare disease patients, the position we have and the likelihood of that just improving over time.

So with that, let me thank all of you. I know we've gone a few minutes over the set time, but thank you all for participating in the call, and we look forward to regrouping with you after the third quarter. Thanks.

[Operator]

This concludes our 2024 Q2 earnings call. You may now disconnect.