Arvind K. Sood - Vice President-Investor Relations Robert A. Bradway - Chairman, President & Chief Executive Officer David W. Meline - Chief Financial Officer & Executive Vice President Anthony C. Hooper - Executive VP-Global Commercial Operations Sean E. Harper - Executive Vice President-Research & Development.

Terence Flynn - Goldman Sachs & Co. Eric Schmidt - Cowen & Co. LLC Matthew K. Harrison - Morgan Stanley & Co. LLC Geoffrey Meacham - Barclays Capital, Inc. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Michael Yee - RBC Capital Markets LLC Robyn Karnauskas - Citigroup Global Markets, Inc. (Broker) Geoffrey C.

Porges - Leerink Partners LLC Mark J. Schoenebaum - Evercore Group LLC M. Ian Somaiya - BMO Capital Markets (United States) Joshua E. Schimmer - Piper Jaffray & Co. (Broker) Neena Bitritto-Garg - Robert W. Baird & Co., Inc. (Broker) Aaron Gal - Sanford C. Bernstein & Co. LLC Cory W. Kasimov - JPMorgan Securities LLC.

My name is DeMarcus Ross, and I will be your conference facilitator today for Amgen's second quarter 2016 earnings 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.

In order to ensure that everyone has a chance to participate, we would like to request you to limit yourself to asking one question during the Q&A session. I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin..

Thank you, DeMarcus. Good afternoon, everybody. So I'd like to welcome you to our conference call to discuss our second quarter financial results. I would like to particularly extend a warm welcome to those who are new in their investment coverage of Amgen, including Ronny Gal and Vincent Chen of Bernstein.

Our second quarter once again is a continuation of great execution of how we are effectively managing the life cycle of legacy products while launching new products. Of course, there's much more to our execution. So to have the broader discussion, I'm joined today by Bob Bradway, our Chairman and CEO, who will lead the call with a strategic overview.

Our CFO, David Meline, will then review our quarterly results and update you on our guidance for 2016. Following David, our Head of Global Commercial Operations, Tony Hooper, will discuss our product performance during the quarter, followed by our Head of R&D, Sean Harper, who will provide a pipeline update.

We should have plenty of time for Q&A after Sean's comments. So before I turn the call over to Bob, I would like to note that we have reviewed the Securities and Exchange Commission's recent guidance regarding the use of non-GAAP financial measures, and our press release incorporates this revised guidance.

As in the past, we will use slides for our presentation today, which have been posted on our website, and a link was sent to you separately by email. We plan on using non-GAAP financial measures in today's presentation to provide information which may be useful to understanding our ongoing business performance.

However, these non-GAAP financial measures should be considered together with GAAP results, and reconciliations of these measures are available in the schedules accompanying today's press release on Form 8-K and also on the Investor Relations section of our website.

Just a reminder that some of the statements made during the course of our presentation are forward-looking statements, and our 2015 10-K and subsequent filings identify factors that could cause our actual results to differ materially. So with that, I would like to turn the call over to Bob.

Bob?.

neurology, where we are excited about erenumab as a potential first-in-class therapy for migraine; bone health, where we recently submitted our bone-building romosozumab to the FDA for regulatory review; nephrology, with the prospect of an imminent launch of Parsabiv; and of course in inflammation, where we were pleased with the recent FDA panel review of our biosimilar to Humira.

With an expected 80 new launches across countries and products this year and the recent reacquisition of rights to many of our existing products outside the United States, we're meaningfully expanding our global footprint.

To that end, we recently announced that we have partnered with Daiichi Sankyo in an effort to bring Amgen biosimilars to the Japanese market. I would also note that we're excited about the scientific progress we're making in our early research labs.

For example, we continue to harness the power of our human genetics platform to uncover fundamental links to human disease. As you saw this quarter, we published research pointing to the role of the ASGR1 gene in cardiovascular disease.

While this is still early stage, it highlights our unique ability to generate insights like this and to move them forward quickly in the drug development process. We expect insights such as this to be central to our ability to innovate and continue to deliver long-term growth and returns for our shareholders.

While we're focused on the long term, we're committed to delivering in the short and medium term as well. Our consistent strong performance has placed us well on our way towards delivering the long-term commitments we made to shareholders for 2018.

The transformation program, which we began some two years ago, continues to deliver savings, enabling us to invest in our business and deliver results for our shareholders.

Similarly, the commitment we made to effectively manage the life cycle of our legacy products is bearing fruit, as reflected in the success of our Neulasta Onpro launch and the success that we're having in offering Aranesp and EPOGEN to our dialysis customers.

Our balance sheet remains strong and we're active in looking for ways to build our business across our six therapeutic focus areas. And we expect to be patient and disciplined in looking for opportunities that we think we can add value to for our shareholders.

Before passing to our Chief Financial Officer, David Meline, let me just thank our staff worldwide for their ongoing dedication to our mission of serving patients and for the results they've once more delivered for our shareholders.

David?.

Okay. Thanks, Bob. Turning to the second quarter financial results on page six of the slide deck, revenues at $5.7 billion grew 6% year over year, with 5% product sales growth, driven by continued momentum across much of our product portfolio. Other revenues at $214 million increased $69 million versus the second quarter of 2015.

Other revenue benefited from higher Ibrance royalty income as well as an upfront partner payment. As a reminder, we receive an 8% royalty on Ibrance revenue, which was acquired as part of the Onyx transaction. Changes in foreign exchange had an immaterial impact on total revenue and product sales in the quarter.

Non-GAAP operating income at $2.8 billion grew 10% from prior year. Non-GAAP operating margin improved to 51.4% for the quarter, reflecting continued growth and progress from our transformation initiatives across all operating expense categories.

In 2016 we remain on track to deliver over $400 million of incremental gross efficiency savings from the transformation versus prior year, with half of incremental gross efficiency savings from the transformation occurring in the first half.

Delivering on this transformation enables continued investment in our pipeline and launch activities while also achieving solid profitability. On a non-GAAP basis, cost of sales as a percent of product sales at 13.5% improved by 1.6 points, driven by manufacturing efficiencies and higher net selling price.

Research and development expenses at $878 million decreased by 4% versus last year, driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs.

SG&A expenses increased 13% on a year-over-year basis, as increased commercial investments in new product launches for the U.S. and global launch activities were enabled by savings from transformation and process improvement efforts. In total, non-GAAP operating expenses increased 2% year over year.

Other income and expenses were a net $176 million expense in Q2. This is an increase of $97 million on a year-over-year basis. This year-over-year net expense increase was primarily due to gains in the second quarter of 2015 from our strategic and venture investment portfolio.

We expect our other income and expenses to continue at the current year-to-date trend level. The non-GAAP tax rate was 18.6% for the quarter, a 1.4-point decrease versus Q2 of 2015.

This decrease reflects discrete benefits associated with tax incentives and the adoption of accounting standards 2016-09, partially offset by unfavorable changes in the geographic mix of earnings. Non-GAAP net income increased 9%, and non-GAAP earnings per share increased 11% year over year.

Turning next to cash flow and the balance sheet on page seven, free cash flow was $2.5 billion for the quarter compared to free cash flow of $3.2 billion in the second quarter of 2015.

This year-over-year decline reflects timing impacts of income tax payments to the IRS and cash gains realized last year from foreign exchange contracts, which benefited from the strengthened U.S. dollar.

We deployed a $0.6 billion to repurchase 3.9 million shares in the quarter at an average price of $153 per share, and are on track to achieve total share repurchase for this year in the range of $2 billion to $3 billion.

Additionally, our second quarter dividend was $1.00 per share, an increase of 27% over last year, which results in a dividend yield of over 2.5% on an annualized basis. At the end of the second quarter, we had $3.6 billion remaining on our board authorized share buyback program.

Cash and investments totaled $35 billion, an increase of $5 billion from last year's second quarter level. This increase reflects continued solid net cash flow and the first quarter debt issuance of $2.9 billion, of which approximately $900 million was used to repay debt maturities during the second quarter.

Our debt balance stands at $33.2 billion as of June 30, 2016. Our total debt portfolio has a weighted average interest rate of 3.6% and an average maturity of 12 years.

Turning to the outlook for the business for the remainder of 2016 on page eight, we remain on track with our plans to continue investing to grow the business while transforming to a more agile and efficient operating model.

Today, we are increasing our 2016 guidance, which reflects continued conviction in executing on our strategy and solid first half performance of the business.

In particular, our overall revenue guidance reflects our recent product launch activities plus continued progress on our growth brands, which grew 13% year over year in Q2 and accounted for over 50% of overall product sales. All of this is while absorbing the impact of competition on our legacy EPOGEN and NEUPOGEN brands.

With this background, our 2016 revenue guidance is now $22.5 billion to $22.8 billion versus prior guidance of $22.2 billion to $22.6 billion. And our non-GAAP earnings per share guidance is now $11.10 to $11.40 a share versus prior guidance of $10.85 to $11.20.

Finally, we continue to expect our adjusted tax rate to be in the range of 19% to 20% and capital expenditures to be approximately $700 million this year. This concludes the financial update. I will now turn the call over to Tony..

first, the performance of our growth products; followed by an update of our life cycle management of the mature brands; and then I'll conclude with highlights on the performance of our newly launched products.

Our six growth products, Prolia, XGEVA, ENBREL, Sensipar, Vectibix, and Nplate, continue to drive our overall performance with 13% year-over-year growth. As David said, they aggregated to $3 billion of sales, or over 50% of second quarter sales. We continue our investments in these brands to achieve their full potential.

Both Prolia and XGEVA are now annualizing at over $3 billion per year. Prolia grew 30% year over year with a 24% unit growth and continued share gains in both the U.S. and Europe. Post-menopausal osteoporosis remains a widely untreated disease. In the U.S.

alone, 10 million people are affected, and 4.5 million of those are considered at high risk of fracture. Unfortunately, nearly 60% of these patients are not treated. We are investing in Prolia to reach these under-served patients and also to remind current Prolia patients about the importance of returning every six months for their treatment.

XGEVA saw a 15% year-over-year growth, driven by unit share gains of around two percentage points in both the U.S. and Europe. Quarter-over-quarter growth was negatively impacted by heavier purchasing from some larger end customers in the U.S. during the first quarter.

ENBREL grew 10% year over year, driven by changes in net selling price, partially offset by competition. As a reminder, changes in net selling price comprise several components, including changes in list price as well as the impact from rebates we provide to payers and formulary decisions.

Turning now to the underlying performance of ENBREL, growth within both the rheumatology and dermatology segments continues. Sequentially, ENBREL lost two points of value share in each segment. Recall that rheumatology comprises about 80% of ENBREL sales. ENBREL has a long track record of safety, efficacy, and a very competitive profile.

We are focused on maintaining our position, particularly in the rheumatology segment. Sensipar grew 13% year over year, driven by net selling price as well as a strong unit growth in U.S. and Europe. We look forward to expanding our presence in the nephrology market with Parsabiv, which is currently being reviewed by the U.S.

and European regulators as a new treatment option for secondary hyperparathyroidism. Next, Vectibix; we delivered strong unit growth in our core markets. However, this performance was masked by comparing against a quarter two in 2015 that benefited from an additional shipment to our Japanese partner.

Nplate grew 14% year over year, driven by double-digit unit growth. I'd now like to focus on how we're managing the life cycle around mature brands. Neulasta sales decreased 1% year over year. The second quarter was negatively impacted by heavier purchasing by some large end customers in the U.S. in the first quarter.

I am pleased to report that the Neulasta Onpro delivery kit continued its strong uptake. Adoption is growing due to its ability to ensure maximum benefit of Neulasta while improving the patient experience versus the traditional pre-filled syringe. We exited the second quarter with Onpro representing about 40% of Neulasta units and still growing.

We do not expect long-acting filgrastim biosimilar competition this year, so there remains a significant opportunity to further increase the adoption of Onpro. As regards to NEUPOGEN, we see the short-acting segment playing out as expected. We ended the second quarter with around 6% share.

We continue to compete account by account, emphasizing NEUPOGEN's sustained track record of safety, efficacy, and of course reliable supply. Now to the ESAs; Aranesp sales increased 5% year over year, driven by 13% unit growth.

In the U.S., we've been successfully transfusing about 75% of patients from EPOGEN to Aranesp in our medium-sized and independent dialysis centers. EPOGEN declined 33% year on year. About one-third of this decline is the shift from EPOGEN to Aranesp in the dialysis setting I just mentioned.

Most of the remaining decline is due to a shift by Fresenius from Amgen ESAs to their own product. We understand that Fresenius, which has about one-third of the U.S. dialysis business, has converted about 80% of their patients. You'll recall that our contract with DaVita, who represent another one-third of the dialysis business, runs through 2018.

We do not expect biosimilar competition against EPOGEN in 2016. Lastly, I'd like to update you on Repatha and KYPROLIS. Both products represent substantial opportunity in addressing serious diseases with significant unmet needs, first Repatha.

Our cardiovascular teams have executed well in the marketplace, but strict utilization management criteria and processes employed by the insurers and PBMs continues to be the biggest hurdle. We're working diligently to address these restrictions so that appropriate patients are able to access the treatment their doctors prescribe for them.

We look forward to the coronary imaging data from the GLAGOV study reading out later this year, and then the FOURIER outcomes data in the first quarter of 2017. We expect that both these studies will further underscore the value of Repatha.

We're also excited to now offer a new monthly dosing treatment option with our recently approved Repatha Pushtronex, the first and only single monthly injection of a PCSK9 inhibitor. Like the Neulasta Onpro delivery kit, this is another example of our ability to identify and develop innovative delivery systems to improve the patient experience.

Outside the U.S., we continue to make good progress with Repatha's reimbursement negotiations on a country-by-country basis. In Europe, we are now in early launches in several countries, including Germany, the Netherlands, Spain, the UK, Austria, and Sweden.

Repatha is an extremely important medicine for high-risk cardiovascular patients, and we are committed to realizing its significant potential over time. Now to KYPROLIS, where we've made great progress in the quarter. We continue to grow volume in an intensely competitive environment with three new competitors, all approved in the U.S. late last year.

This growth is encouraging as we continue to educate physicians on the benefits of KYPROLIS as a backbone of multiple myeloma therapy. Our focus is on continuing to drive adoption of KYPROLIS in relapsed patients based on the compelling ASPIRE and the ENDEAVOR data.

The early launches from our European organization into second-line are very encouraging. KYPROLIS has been well received and we continue to gain reimbursement approval country by country. The EU label now includes KYPROLIS in both a three-drug regimen based on the ASPIRE data as well as a two-drug regimen based on the ENDEAVOR data.

In summary, the second quarter was another strong quarter for Amgen. Our growth products led the way while we defended our mature products. We've made good progress on bringing new launch products to more patients in both existing and new countries.

And we remain convinced about the long-term growth potential of our launch brands and are working intensely to ensure their success. Let me close by recognizing that none of this would have been possible without the dedication of our staff and thanking them for their commitment to delivering for patients. Let me now pass you to Sean..

Thanks, Tony. Good afternoon. We continued to make good progress advancing our pipeline of both innovative and biosimilar molecules. Let me begin with cardiovascular. We don't believe there is any compelling evidence that supports treating high-risk atherosclerotic patients with anything but aggressive LDL cholesterol lowering therapy.

Our approach with Repatha differs from that taken by the other marketed PCSK9 inhibitor in that we only maximally inhibit PCSK9 and LDL cholesterol. Our clinical program demonstrated that we could achieve this effect with either 140 milligrams of Repatha delivered every other week or 420 milligrams delivered monthly.

And, as reflected in our label, these two dosing schedules were clinically equivalent. Now that we've received approval in the United States for the innovative Pushtronex delivery system, we can offer patients the choice of an auto-injector pen for every other week or single monthly dose administration with Pushtronex.

As we announced last month, we expect the results from our Phase 3 cardiovascular outcomes study to be available in 1Q of 2017, in time for submission to the American College of Cardiology meeting in March. I would remind you that this is an event-driven study.

And at the time we had accrued in excess of 85% of the requisite events, which allowed us to more accurately predict the timing for the study completion. This is a large study at 27,500 patients, and we remain focused on generating the most robust data set possible in this field from an analysis of the completed study.

Ahead of this, we also expect the coronary imaging study results later this year, which we expect to complement the cardiovascular outcomes data.

In heart failure, after discussions with regulators on omecamtiv mecarbil, our novel cardiac myosin activator from Cytokinetics, we have submitted our heart failure outcomes study protocol for Special Protocol Assessment, or SPA, to the FDA and continue to work with our partners toward advancing in this novel area.

Turning to oncology, we were pleased to receive European approval for Kyprolis in combination with dexamethasone in the relaxed refractory multiple myeloma setting based on the ENDEAVOR data.

In the first-line setting, we're conducting CLARION, an approximately 900-patient head-to-head superiority study for Kyprolis versus Velcade, both administered concomitantly with melphalan and prednisone in transplant ineligible subjects with newly diagnosed multiple myeloma. This has a primary endpoint of progression-free survival.

Based on the current event rates, we now expect the primary analysis and top line results of the completed study in the second half of this year. Before I leave multiple myeloma, I'd like to remind you we remain on track to complete our Phase 3 study of XGEVA versus zoledronic acid in the prevention of skeletal-related events.

In the quarter, we announced that FDA had granted Priority Review status to BLINCYTO for the treatment of pediatric Philadelphia chromosome-negative relapsed refractory ALL, with a PDUFA action date of September. In the adult population, we had the opportunity last month at ASCO to present the results of our confirmatory Phase 3 study of BLINCYTO.

In this study, BLINCYTO demonstrated an almost twofold increase in median overall survival compared to the standard of care. We will be discussing these data with regulators as we seek conversion to full approval in our current indication.

As we announced last week along with our partners at UCB, we have submitted our romosozumab BLA to the FDA for the treatment of osteoporosis in post-menopausal women at increased risk for fracture.

We'll be presenting the data from the pivotal Phase 3 FRAME study at the annual meeting of the American Society of Bone and Mineral Research in September, and we look forward to sharing the results with the medical community.

Recall we're also running a Phase 3 fracture study of romosozumab compared to alendronate, which will contribute to our submission in Europe, and we expect these data in 2017.

For Prolia, later this year we will be reviewing the data from our Phase 3 study in the setting of glucocorticoid-induced osteoporosis, a relatively small but medically important indication. Our neuroscience programs continue to advance.

In our migraine collaboration with Novartis, we were pleased to receive positive results for erenumab, or AMG 334, our CGRP receptor antibody, in our Phase 2b chronic migraine study. These data will be presented at the European Headache and Migraine Trust International Congress in September.

This was a large robust study, and we believe that these data together with our two Phase 3 studies in episodic migraine reading out later this year could support registration in some jurisdictions. So we intend to seek both indications in our initial submission.

Our other clinical migraine program is our PAC-1 antibody, AMG 301, which is currently proceeding nicely through Phase 1 development. PAC-1 is a receptor for PACAP, a neuropeptide implicated in migraine.

We believe that AMG 301 has the potential to be additive or synergistic to erenumab given that PAC-1 is mechanistically differentiated from CGRP, and we're therefore pursuing the concept of a bi-specific PAC-1 and CGRP receptor antibody as well.

In our nephrology franchise, we continue to work with regulators on our Parsabiv application and look forward to our PDUFA date in the U.S. next month. Parsabiv provides an opportunity to offer a novel intravenous calcimimetic option that's administered by healthcare providers three times a week, coincident with the patient's dialysis session.

Parsabiv will be the first therapy approved for the treatment of secondary hyperparathyroidism in over a decade. Finally, within our biosimilars program, last week we announced results from our Phase 3 study evaluating the efficacy and safety of ABP 980 compared to trastuzumab, or Herceptin, in patients with HER2-positive early breast cancer.

Based on the overall bioanalytics, efficacy, safety, and immunogenicity, we believe there are no clinically meaningful differences between ABP 980 and trastuzumab. And we look forward to discussing these data with regulators.

As always, I'd like to thank my Amgen colleagues for their continued advancement of important new medicines for patients around the world.

Bob?.

Okay. Thank you, Sean. As you can see, it's another active quarter here at the company, but I hope you'll agree another quarter of solid execution as we make progress towards our short, medium, and long-term goals of delivering growth for shareholders.

So with that, why don't we turn it over to the question-and-answer session? And perhaps we can ask our operator to remind you of the procedure for asking questions..

Absolutely. Your first question comes from the line of Terence Flynn with Goldman Sachs..

Hi, thanks for taking the questions, maybe two for me. Just first on the COGS, pretty impressive versus a year ago, just wondering if that level is sustainable longer term. And then on Repatha, Sean, can you remind us what you want to see out of the IVUS trial and if there's any potential read-through to the outcomes data coming next year? Thank you..

Okay, Terence, we'll try and take those in two parts. I'll ask David to speak first about the question about COGS, and then Sean can talk about Repatha. But big picture, as you know, we've been working towards improving the efficiency and productivity of our manufacturing organization for some time.

You've heard us say before, Terence, we think manufacturing is a source of competitive advantage for Amgen, and we're excited about what we've achieved to-date and where we're going next with the introduction of our next-generation bio-manufacturing. So generally the trend is positive. You see that reflected in the quarter.

And, David, do you want to provide any more specific guidance on that?.

No, very much the same, Bob. So what we're seeing is, as you would know, we consolidated our manufacturing activity to try to improve the efficiency, and you're now seeing that coming through into the results.

So I would say through time, we'll seek to maintain our cost of sales at that very competitive level, recognizing there will be some pressure on us in terms of the cost of sales as we introduce the new portfolio. But we think it's a reasonable trajectory overall..

And, Terence, I think with regard to the IVUS study and the outcomes, the way to think about this is that what we're pursuing here in both studies is the hypothesis that, as we continue to lower LDL, the relationship between LDL and outcomes will be maintained that we've observed with statin therapy over the last 20 years.

And within the IVUS dimension, there has been a clear relationship between the lowering of LDL and the volume of plaque. And that linear relationship looks remarkably similar to the one that you see when you look at outcomes versus LDL. And there is a known relationship between that IVUS type effect and outcomes.

So it all does tie together, and I think that we would be expecting to see conceptually what we believe that the benefits that are observed both with respect to impact on slowing the progression of plaque volume or causing regression of plaque volume as well as in the outcomes dimension, that these are all mediated in the case of statins by the lowering of LDL cholesterol.

So we expect that pound for pound, if you will, with the LDL cholesterol lowering, we will see very similar results. So I think those are the hypotheses we're testing with the two studies..

Your next question comes from the line of Eric Schmidt with Cowen & Company..

Congrats on a really solid quarter, maybe a couple quick ones for Tony. Can you talk about the impact that Darzalex is having on Kyprolis? It does look like from the monthly IMS data that we get that there's been a little competitive impact there.

And then second, I was surprised to see that Amgen is branching out into the ultra-orphan space, at least with an eculizumab biosimilar.

Can you talk about how that program might fit commercially with your current capabilities?.

Okay, thanks, Eric. As you know, the data inside the multiple myeloma market is a bit more complicated to try and segment between first, second and third-line plus, and we often have to use chart orders for that.

Based on the data we've seen, Darzalex is clearly a good product, but we truly see the combination potentially of this product and Kyprolis as a future regimen in treating multiple myeloma. Most of the usage we've seen with Darzalex at the moment is fourth-line plus, however.

To your question on our new biosimilar opportunity, I think Amgen has specialized for many years in specialty drugs with a focus target population, with low resources required to get to prescribers and to identify patients. So I think that one fits quite well with our model..

Your next question comes from the line of Matthew Harrison with Morgan Stanley..

Great, thanks for taking the question. If I could ask, just maybe if you could, comment broadly on biosimilars. You've got three that are at regulatory submission or in regulatory submission.

Could you just walk through what your thoughts are around when you might be able to launch those products, some of the remaining legal hurdles that you're going to have to get through, and how you see that revenue stream developing over the next year or two? Thanks..

Matthew, a couple things. First, as you know, we have some nine programs that are under development. Over time, we think those could be an important source of growth and revenue opportunity for us at Amgen. We think that our commitment to developing these biosimilars reflects our belief.

The capabilities we have established for our innovative business will lend themselves well to developing a branded biosimilar portfolio as well. The next step for us on the three that are in advanced regulatory stages is the same path for each of the three. It starts with needing to get regulatory approval.

So we hope and expect that we'll have an opportunity to get regulatory approval for our first, which is the biosimilar Humira, later this year. And with the benefit of that then, with that approval in hand, we'll turn to the questions of commercialization, as we will for the other two.

So first thing we need to do is get approvals, and that's what we're working on securing right now. As to your question about revenue profile and what we're going do when the approvals are in hand, we'll wait and comment on those issues at the appropriate time, Matthew..

Your next question comes from the line of Geoff Meacham with Barclays..

Good afternoon, guys, thanks for taking the question. Sean, I have a couple for you on erenumab. The first one, for the chronic migraine data last month, how would you view the baseline migraine data relative to – just put that in context with the real world? Second point, as we look forward to the episodic data, obviously a more variable population.

Maybe help us with how you'd characterize a result as being clinically meaningful in this population. Thanks..

Sure. I think when we look at the data from the chronic migraine study, it appears to us as though we have enrolled there a very representative population of this type of afflicted group. And as you know, these people are suffering with just an unimaginable number of these headaches per month.

As we talk to the experts in the field, it seems that the population that we enrolled there in terms of the baseline level of headache and the kind of response that we saw in comparison to other product candidates in this axis are all as we might have expected.

In the episodic migraine setting, of course, the baseline number of headache days are by definition less, but the treatment effect is still quite robust and reproducible, and I think that's been the case.

It's within the world of neuroscience products, quite remarkable when you look at the data across the small molecules that have been entered in this space, the ligand-sequestering antibodies and erenumab that you see a remarkably consistent treatment effect.

One comment I'd make is that it's the case that this treatment effect is robust, it's reproducible, but there also is quite a large placebo effect that patients get that comes along with the treatment effect, and it's durable over a long period of time.

This is actually what the patient experiences, which is not unique to neuroscience but it's particularly potent in this setting. It's a little hard to get your mind around that sometimes, but this is what people who actually care for these patients emphasize to us to when we look at the data..

Your next question comes from the line of Alethia Young with Credit Suisse..

Hey, guys. Thanks for taking my question. Congrats on the quarter.

One, can you give us a little bit more color on the timing around biosimilar eculizumab data that's the study in New Zealand? And then also on a second point, can you just frame for us how you think about some of the competitors in the migraine space and how your drug may stack up? Is it a matter of differentiation or is it just a commercial battle in your mind?.

Okay, a couple different questions here. We'll start with the migraine question, Sean, then we'll talk about the field..

What I would say again, and I just made this comment that when you look at what's gone on where mainly companies that have been driving for proof-of-concept and/or dose-ranging their products, they've used doses of either small molecules, ligand-sequestering antibody or receptor antibodies in our case that are saturating the system.

And when that happens, that's how across all these different studies across different companies and so on, you're seeing a very consistent result because you're maxing out the impact that inhibiting CGRP can have in migraine. So that's nice to see.

And then really it comes down to the question of what is the minimal dose that's effective in achieving that effect. And I think then the devil gets into the details really around the issue of how easily administrable is that particular amount of antibody. So there's going to be a certain milligram amount of antibody that has to be administered.

Let's say we believe a monthly subcutaneous disposable auto-injector would be a very nice solution to this otherwise healthy active type of population. And I think that others of course are pursuing strategies that are different than that, and I think it will be interesting, obviously, to see how that all plays out. Tony, you could comment.

But I think scientifically, I've not seen any data to suggest that these products are different from one another with respect to what they can achieve when they are dosed and saturating quantity..

Sure. So we've seen the good clinical data, and I think there will be clearly a need for a good marketing plan, a good strategy, a good share of voice, and understanding what makes patients move to request this type of medication. The market is hugely unmet at the moment.

There's a large amount of patients who are clamoring consistently and looking for help to try and treat this terrible disease. So it's a combination of both clinical science and a good strategy..

With respect to your biosimilar question, Alethia, we've disclosed that we've begun the program, and that's all we're disclosing at this point..

Your next question comes from the line of Michael Yee with RBC Capital Markets..

Hi, good afternoon, a question on Parsabiv, which has a PDUFA date. The Sensipar franchise is over $1 billion.

Can you just remind us how to think about the new product versus the loss of exclusivity period for Sensipar? If there's a swapping, how do we think about that line item as that product comes on? And then to follow up on Repatha, can you remind us how much usage is once-monthly now? I assume it's small.

But what do you expect that to be over time, once monthly? Thanks..

Michael, we're having a little trouble hearing you, but I think you had two questions that Tony can address, the first about Parsabiv, which, as you know, is the subject of a PDUFA date later this summer. And then with respect to the once-monthly Repatha, I think that's the question Michael was asking..

So let's start with the Parsabiv question. As you know, Sensipar has been extremely successful in treating patients both in the U.S. and around the world. But in spite of the efficacy of Sensipar, we probably only have about a 26% penetration.

Compliance or patient persistency in this particular market is always an issue to ensure patients who are on dialysis three times a week actually take their tablets every day as well. Parsabiv brings a combination of potentially a better level of persistency because you'll be infused while you're having your dialysis.

But the second thing is, as you've seen from the clinical data, in fact, there appear to be a much more robust level of efficacy of Parsabiv. CMS have granted us a two-year period that this product will exist outside the bundle while they determine the medical value, to determine the value of putting it back in the bundle.

So we continue to be excited about the product. There are patients who will take oral. There are patients who will take an injectable, and we'll see how many patients we can assist with both products. As regards Repatha, there's very little usage at the moment on the monthly dose. We have not had a patient-friendly dose up until now.

There appear to be a fair amount of patients who would prefer to have a convenient once-a-month dose. And we're spending quite a bit of time talking to cardiologists about this, and we'll be coming to market in the next couple of weeks..

Your next question comes from the line of Robyn Karnauskas with Citigroup..

Hi, guys, thanks for taking my questions. So I have a question for David. On M&A, a lot of questions we're getting across the board in biotech on M&A.

How are you thinking about how competitive this space is right now for M&A given that many players are thinking about – talking about actually buying things? Do you find the space competitive? And how do you think about timelines? Are people being more realistic about valuations? Thanks..

Sure, so I think what I would say about M&A right now is indeed, first of all, we've been consistent in indicating that we have a broad set of interests, in particular around the six therapeutic areas where we're particularly focused. And so we've said that we're open to look at transactions that could range from early to late-stage.

And I think the point is we want to make sure we see everything that might be of interest to us, and I think we're seeing that, first of all. Certainly, we're in a financial position to be able to be competitive. And then secondly, it's true. We're not the only people out there who are in the market looking for opportunities.

So I think the point for us is we need to make sure that we first of all look at things as to the scientific insight that we can bring to bear, including with our insight from a human genetic perspective. And then secondly, we are very clear that we're going to be disciplined in terms of the financial returns that we can expect.

And we're interested in doing deals that will create returns for Amgen, not just the seller. So we continue to be active and we've got a number of pretty interesting prospects that we think could come to closure, including still this year..

Your next question come from the line of Geoffrey Porges with Leerink Partners..

Thanks very much for taking the question, just a two-part question on biosimilars and then government effects.

So could you talk a little bit about how the proposed Part B changes might play out and potentially affect your business? And secondly, how might that alter the landscape for some of the biosimilars that you're developing or influence that? Thanks..

So let me take that one, if I can. This is Tony. Clearly, Amgen has raised some strong objections and questions to the proposed pilot together with about at least 300 other organizations.

The concern is always when you do something based on acquisition cost around an ASP adjustment, are you ensuring that patient safety and patient concerns are included? So it's difficult to make a comment at the moment, Geoff, about something that's not been put into place yet. It's a proposal.

It's up there for comment, and we're working with other people to make sure that if there is a change, patients are protected all the way through..

Your next question comes from the line of Mark Schoenebaum with Evercore ISI..

Hey, Arvind. Do you actually like Ronny Gal? Because I've known him for years and we should chat. Hey, I had a question for – I love Ronny, by the way. It's a total joke. This was touched on here and there, but your margin guidance, David, goes through 2018. We're now dangerously close to 2017. I understand you can't give us any guidance.

But can you just talk to us about your latest thoughts qualitatively about where margins could go after the plan that you've announced? Should we expect further modest margin expansion? Should we be modeling something right along the lines of what you're doing now? Just anything like that, I'd love to hear you riff on that.

And then, Bob, what's your appetite for an at-risk Humira biosimilar launch? And, Sean, I'd just be curious real fast to get your opinion. You guys have a CETP. I'd love to know what your opinion on that class is now, just like 30 seconds. Thank you..

So on the first one on the margin, the margin walk for the company, I would say, as we've been seeing, we're very pleased with the progress that we've made towards the goals we've set out for ourselves in 2018.

So you look at the combination of continued growth of the business, you look at the progress we're making, which by the end of this year we expect to be delivering a $1.1 billion improvement on our cost base versus 2013, and we see us certainly achieving the $1.5 billion goal that we set out.

Likewise, if you look at the progress on the margins where we started at a 38% margin in 2013, you've now seen us this quarter again deliver over 50% on the way to 52% to 54%. So first of all, I'd say we're pleased with the progress.

We're running the company in an agile and efficient manner while still investing significantly for the long-term health of the business. The second point I'd make is, we're exactly as of midyear 2016, now we're halfway through the period through 2018.

And quite frankly, while we're making very good progress, I think it would be a mistake for us to take our eye off the ball, to continue to focus on delivering against those goals that we've set out for the company. So first and foremost, we're looking at delivering on those goals.

And in due course we'll be looking then in terms of the financial performance beyond that. But I think the important point is we think we've got a business that's sustainably delivering very good performance financially and investing in the innovation and long-term pipeline for the company..

Sean, do you want to briefly comment on CETP?.

Sure. I think at this point in the game, most folks are really just waiting now to see the Merck CETP study read out. I assume midyear next year is what we've most recently heard. Before making any final judgments, I would say that the Lilly data did cause folks who were believers in the mechanism to take significant pause.

And certainly, what we've done is to suspend any investment in this area until we see the Merck data..

And, Mark, it won't surprise you to know that we're not going to comment on your question about our launch plans for Humira, as I said earlier on the call. The next step is for us to get regulatory approval for our molecule, and that's what we're focused on securing..

Just to make sure that we don't exceed the one hour of our allocated time here, may I request that you limit yourself to just one question so we can get through everybody's questions? DeMarcus, let's go ahead with next one please..

Yes, your next question is from the line of Ian Somaiya with BMO Capital..

Thanks for sneaking me in there, just a question for Tony.

How should we think about the launch of yet another oral in the RA market? Are there any parallels to your experiences with an oral in psoriasis and the impact it's had on Enbrel sales there?.

So the first launch of an oral was obviously not that successful. The launch into psoriasis was interesting because it expanded the marketplace and brought into the market a number of patients who perhaps were earlier in their disease, who weren't quite ready yet to move on to any injectable biologic.

It's quite possible that there are a bunch of patients between methotrexate and a biologic that could become eligible for this opportunity. But if you look even in psoriasis, the overall market for the TNFs have remained, just the overall market has grown..

Your next question comes from the line of Ying Huang with Bank of America Merrill Lynch..

Ying, are you there? Maybe you have us on mute. Okay, let's go on to the next question..

The next question comes from Josh Schimmer with Piper Jaffray..

Great, thanks very much for taking the question. I was wondering if there is any difference in the dynamics for share loss to a NEUPOGEN biosimilar in the 340B hospital setting versus – the 340B (55:20) setting. Or if you can, discuss a little bit how the dynamics there might differ between those two. Thanks..

Again, sorry, Josh, it was....

I think you were talking about the difference between PHS [Public Health Service] and non-PHS, right?.

Correct..

Clearly I think anyone who's come new into the market has gone off to non-PHS hospitals first..

What share is PHS?.

I couldn't give you that offhand. It's tough to pull that type of data just offhand here. If we need to, we'll come back to you on that one..

Your next question comes from the line of Ying Huang with Bank of America Merrill Lynch..

Looks like Ying is still absent. Okay, let's go on to the next one..

Your next question is from the line of Brian Skorney with Robert W. Baird..

Hi, this is Neena on for Brian. So I had a question about omecamtiv. I know you said that the Phase 3 protocol has been submitted, but we were just wondering what the gating factors are to starting a Phase 3 trial, just because we know the Phase 2 data has been out for a while now.

So are there regulatory issues or something like that that's holding it up, or something else?.

What I would say is that we have been moving aggressively with this program.

We had to of course go through some meaningful discussions with regulators around things like the dosing algorithms that would be used, safety of the product, and so on because of the fact that just based on the mechanism and there is a narrow therapeutic window for the product, and when we're assessing drug levels and how the titration scheme.

So that's moved along. I think we've been able to design a very robust study and have decided that we should put it through the Special Protocol Assessment at FDA. So things are actually moving along as fast as I would have expected to on a complex program like this..

As it's getting close to 6 PM on the East Coast markets, let's take two more questions..

Okay, your next question comes from the line of Ronny Gal with Bernstein..

Good afternoon and thank you for taking my questions. My question is about indication-based pricing in anti-TNF and the broader anti-inflammatory market. How do you guys think about this? Is this good, is this bad? Will it impact Enbrel in a positive way, maybe willing participants or less so, to see if you could give some color..

It's Tony. Let me respond to that one as best I can. First of all, Amgen has been really at the forefront of innovative solutions to improve patient access, including innovative contracting such as outcomes-based and risk-based contracting.

We are partnering with payers on patient-centered approaches to ensure that patients get access to the best available medications, and that physicians make the right choice for the right patient, and at the same time the patient share of cost is manageable.

As regards indication-specific contracts, I think it's too early at this stage to actually give any comment about what the impact could be..

Your final question comes from the line of Cory Kasimov with JPMorgan..

Hey, good afternoon, guys. Thanks for squeezing me in. I wanted to ask about pricing as well. I'm really curious on how we should be thinking about the sustainability of price increases in this environment.

More specifically, when thinking about Enbrel and the four meaningful increases you've had in the last couple years, I assume you're not getting much pushback at the payer level to be able to push these through.

But are you comfortable with us modeling this pace of increases to continue, as I think many were assuming this would tail off across the space given the rhetoric that's out there? Thanks..

So, Cory, again, a question that a lot of people are asking I'm sure. But as you know, we price our products based on the value in the marketplace, taking into account the value they bring to payers, to providers, to patients, the competitive landscape itself.

Enbrel in particular of course competes in a highly competitive marketplace with several large players who are competing for formulary placements to enable patient access. The health plans and the PBMs negotiate price concessions and large rebates to gain formulary placement.

Because of the magnitude of these rebates, price increases have become part of the competitive dynamic. That's about all I can tell you at the moment..

Great. Thanks, Tony. I'd like to also thank everybody for your participation in our call. As you go through our results, if you have added questions, observations, feel free to reach out to me. Myself and my team will be around for several hours. Thanks again..

Ladies and gentlemen, this concludes Amgen's second quarter financial results conference call. You may now disconnect..