Amgen Inc. (AMGN) Q3 2011 Earnings Report, Transcript and Summary

My name is Marvin, and I will be your conference facilitator today for Amgen's Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may begin.

Thank you, Marvin. Good afternoon, everybody. I would like to welcome you to our conference call to discuss our financial and operating results for the third quarter. With more than 3 quarters of the year behind us, our business continues to perform well, and has good momentum as we head into the latter part of the year. We have also taken several actions so we can deliver meaningful returns to our shareholders. To discuss our results and these initiatives, I'm joined by our Chairman and CEO, Kevin Sharer, who will provide a strategic overview of our performance, followed by our CFO, Jon Peacock, who will provide additional details on our financial performance during the quarter. Our President, Bob Bradway, who was also recently elected to our Board, will provide some additional color on how our products performed during the quarter, followed by our Head of R&D, Roger Perlmutter, who will provide an R&D update. We'll use a handful of slides for our presentation today. These slides have been posted on our website, and a link was sent to you separately by e-mail. Our comments today will be governed by our Safe Harbor statement, which, in summary, says that through the course of our presentation today, we may make certain forward-looking statements, and actual results could vary materially. We will use non-GAAP financial measures to help you understand our underlying business performance and the GAAP reconciliations are provided in our press release. So with that, I would like to turn the call over to Kevin.

Thank you, Arvind, and good afternoon, everyone. I suspect you've read the press release and have our materials, so I'd like to make some comments on the performance of the company and where we are. As you can see from our results, our business continues to perform well with revenues and EPS both up 3%. Jon and Bob will review our financial and commercial performance in a moment, but I feel like we're well on track. We announced today that our Board has authorized a $10 billion in share repurchases. The intent of this is to accelerate meaningfully our stock repurchase program, and this reflects our confidence in our future outlook and long-term value, as well as the capital markets' interest rate very favorable conditions. In the quarter, we also announced 2 important executive personnel positions. I'm delighted that Bob has been elected to our Board of Directors, and we're also pleased that Tony Hooper has joined us from Bristol as Executive Vice President Commercial reporting to Bob. Bob's experience and insights will add real value to our Board, and Tony's many years of U.S. and international commercial experience will help drive our growth. We also announced an agreement in principle with the U.S. government to settle allegations relating to certain sales and marketing practices, which have been the subject of previous disclosures. We recognized a $780 million reserve in anticipating and finalizing this settlement, which should happen in the next 3 to 4 months. As we have approach the end of the year, I'm encouraged by the momentum and outlook for the business, leading us to raise our guidance and -- on revenues and earnings per share for 2011. Amgen is in a good place. We look forward to finishing a strong year, and I want to thank all of Amgen's staff for their exceptional efforts this year on behalf of shareholders and patients. Jon, over to you?

Thanks, Kevin. I'll start with a few comments in our performance in the quarter, then address balance sheet issues and our updated guidance for the year. Overall, revenues grew 3% in the quarter. Excluding ESAs, product sales grew 13%, reflecting strong growth across the portfolio, particularly on Europe franchises. Bob will comment more on our product sales in a few minutes. Operating expenses grew by 11% compared to the third quarter of 2010. More than half of the increase was driven by the Puerto Rico excise tax for which we benefit from an offsetting foreign tax credit further down. Foreign exchange movements on our international costs and the U.S. health care reform fee. The balance of the increase in operating expenses, which was explained by research and developments in SG&A, research and development increased 11% year-on-year driven by our late-stage clinical program costs. But quarter-on-quarter, R&D costs declined by $45 million. SG&A increases were driven by investments in the expansion of our international operations and in the launch of XGEVA. You'll see adjusted earnings per share have increased by 3% compared to 2010. There are 2 drivers of this increase relative to operating income. First is the tax rate of 10.9%, which benefited from the foreign tax credits associated with the Puerto Rico excise tax. Excluding the Puerto Rico foreign tax credit, the rate would have been 17.4%. And to a lesser degree, the lower rates in the quarter also benefited from the federal R&D credits, which was not yet extended in the third quarter of 2010. The second factor impacting earnings per share is the average number of diluted shares, which were 913 million for the quarter, 5% lower than the third quarter of 2010. I'll talk more about our share repurchase activity on the next page. Now to reiterate, and as Kevin highlighted earlier, we've reached an agreement in principle to settle allegations related to certain sales and marketing practices that have been a subject of previous disclosures. In connection with this agreement in principle, again, as Kevin mentioned, we've recognized the $780 million reserve, which reduces our GAAP EPS in the quarter by $0.77. And we anticipate finalizing the settlement over the next 3 to 4 months. Turning to the next page, first of all, cash flow from operations, you may have noticed that there's a $300 million lower in the quarter compared to the same period last year. There are 2 reasons for this. The first was a full year payment in the quarter of the U.S. health care reform fee, and the second was an advance payment of $145 million that we chose to make on future sense of our royalties in exchange for an attractive discount from the licensor. During the quarter, you'll also see on the page that we repurchased 45 million shares at an average price of $53.30 per share. This brought the cost of our total share repurchases in 2011 to $3.2 billion at an average price of $54.10. Looking forward, Amgen's Board of Directors, again as Kevin mentioned earlier, has authorized an increase for the company's stock repurchase program to a total amount of $10 billion. We intend to use this to accelerate our share repurchase program, reflecting our confidence in the outlook and the long-term value of the company and the attractive interest rate environment. The capital plan we communicated in April left us with a significant and increasing net cash position. We now believe we can maintain the flexibility that we need to grow our business, consistent with the plans we outlined in April, while also improving the returns to our shareholders by accelerating our stock repurchase plans. This means that we plan to return more than 60% of our net income to shareholders, on average, over the next few years. Within this, we maintain our plan to increase the dividend meaningfully over time, and we'll also maintain a solid investment grade rating. Finally, turning to the next page, we've increased our guidance on revenues and adjusted EPS to $15.4 billion to $15.6 billion on revenues, and to fill our $5.15 to $5.30 a share on adjusted EPS. Related to this, we've also lowered our guidance on the full year tax rate to 14% to 15% linked to the Puerto Rico tax credits. Let me turn over to Bob to address the commercial side of the business.

All right. Thank you, Jon. On Slide 9, I'll walk you through a summary of our global commercial performance for the third quarter. As noted in our press release, our global product sales grew by 3% versus the third quarter of 2010. Excluding ESAs, sales grew 13% during the quarter, reflecting strength across the remainder of our portfolio and particularly, in our newer franchises. I'll review the product starting with Neulasta and NEUPOGEN. Globally, Neulasta and NEUPOGEN grew 6% during the quarter. In the U.S., these products were up 8%, fueled by both price and unit demand for Neulasta in particular. Unit demand continues to benefit from increased first cycle penetration. Internationally, we maintained record shares in this segment and reported a 3% increase in sales with the benefit of foreign exchange. Enbrel sales were up 1% versus the third quarter of last year. Rheumatology segment grew in the mid-teens, and we maintained our leading share at a relatively stable 31%. The dermatology market grew 20% year-over-year. Although we lost 6 share points to competition on a year-over-year basis, Enbrel maintained a leading 40% share on dermatology as well. Year-to-date, Enbrel is up 6%. Our "On Course with Phil" campaign featuring Phil Mickelson has received positive early feedback for building awareness of treatment options for patients with psoriatic arthritis. Turning to EPOGEN, EPOGEN sales declined by 27% versus the same quarter last year. The decline was driven primarily by the implementation of bundling and the product label changes and proposed CMS actions, which were announced at the end of the second quarter. Just as we saw with bundling, we've seen a rapid implementation of protocol changes by dialysis providers in response to recent ESA label changes and proposed CMS actions. You may recall from our second quarter call that we expect that these changes to play out relatively quickly, and result in a full year dose decline in the range of 20% to 25%. That remains our view. We believe that the majority of the dose decline will play out this year, with only a minor residual impact through the first quarter of 2012. The ESA label changes also impacted Aranesp sales, which declined 4% during the third quarter. Sensipar, Vectibix and Nplate on the other hand, grew 19% versus the third quarter of 2010, contributing to the strength of our portfolio outside of the ESAs. Turning to our global launches for denosumab, we're pleased with the momentum that we see for XGEVA. The product grew 40% versus the second quarter of 2011, and surpassed the $100 million in sales in just our third full quarter since launch. This growth continues to be driven by share gains and overall SRE segment growth. XGEVA ended the quarter with a unit share of approximately 23%, as we continue to take share from IV bisphosphonates. The SRE segment grew 7% on a quarter-over-quarter basis. In terms of use in neurology clinics, there are now twice as many neurology practices using a bone-targeting agent now as compared to the period prior to the launch of XGEVA. On the international front, we launched XGEVA in Germany during the third quarter, and the product is off to a strong start. Prolia grew 16% versus the second quarter, reflecting growth in our international markets. In the U.S., Prolia sales were soft in July and August, reflecting seasonal trends in the osteoporosis market overall, and particularly for new patients starts. I would note we saw a strong rebound in our sales growth trends in September, and so far, through October. You may recall from our prior comments that we expect broad coverage under Part D to serve as an important catalyst for Prolia. Let me give you an update on that front. Securing access was the first step in the process of advancing the retail segment of the Prolia business, and we achieved that by the end of the last quarter. As most primary care physicians prefer Part D, we are now focusing our efforts on enabling them to simply write a prescription for Prolia. As part of this, our representatives are working with providers to help navigate through the issues that come up under Part D, such as the prior authorization process to ensure successful payment claims. We're making progress here and have seen a significant increase in submitted retail claims in recent weeks. Internationally, Prolia grew 43% versus the second quarter of this year. And at the beginning of the fourth quarter, we have now launched in Italy and Spain, expanding our coverage to 75% of the EU sales opportunity for Prolia. More generally in our International business, excluding the impact of foreign exchange, sales grew by 5%, or again 12%, excluding ESAs. We continue to maintain shares against biosimilar competition for Aranesp and Filgrastim and have maintained our price premium for both. Internationally, Vectibix, Nplate and Mimpara grew by 23% in the aggregate. We're pleased with our continued progress in new and emerging markets where we saw year-over-year sales growth of 43%. For the U.S., I'd note that at all of our products ended the quarter with wholesale inventories in their normal ranges, except for EPOGEN, which was one day above our normal range. And some we're pleased with a broad strength of our business, particularly our newer products. And we believe we're well-positioned for growth heading into 2012. Roger?

Thanks, Bob. This afternoon, I will review some of our clinical programs, and I will speak briefly about the R&D restructuring that we announced last week. Turning to Slide 11. In the third quarter, we continue to make significant progress in advancing our late-stage programs. Early in the quarter, the European Commission granted their marketing authorization for XGEVA as a means of preventing bone complications in patients with solid tumors that have metastasized to the skeleton. As Bob indicated, the launch of XGEVA in Europe is just beginning, but is proceeding well. I should note that we are working closely with the FDA on the review of XGEVA and the setting of castrate-resistant prostate cancer as a means of delaying bone metastases. The PDUFA date for this review is April 26, 2012. Also with regard to denosumab, during the third quarter, the FDA expanded the indication for Prolia to include treatment of patients at high risk for fracture who are receiving androgen deprivation therapy for non-metastatic prostate cancer or adjuvant aromatase-inhibited therapy for breast cancer. We continue to make great strides in enrolling our key Phase III programs. The first with respect to talimogene laherparepvec, our oncolytic virus therapy. We have completed enrollment of our Phase III study in patients with advanced malignant melanoma. The therapy previously referred to as OncoVEX GM-CSF, will henceforth, for obvious reasons, be denoted as TVEC [ph]. As you will recall, TVEC [ph] is administered by injection into visible tumor masses, and acts both by directly lysing the tumor, as well as simulating a systemic immune response to malignant cells. The primary end point for this study remains the durable complete response, though enrollment was increased to provide more power for observing an overall survival signal. We've also made extremely good progress in enrolling Phase III studies for AMG 479 in pancreatic cancer and AMG 386 in ovarian cancer. Regarding the latter, some of you will be aware that shortages in the chemotherapy agent DOXIL from Johnson & Johnson may delay enrollment in our TRINOVA-2 Phase III study, exploring the use of AMG 386 as second line therapy in ovarian cancer patients. Such a delay, should occur, will not have any effect on our ability to gain registration for AMG 386 using our larger TRINOVA-1 Phase III study, which employs AMG 386 in combination with a different chemotherapeutic regimen. We've had detailed discussions of regulatory agents on our Phase III study designs for AMG 785, our sclerostin antagonist for patients with low bone mass at high risk for fracture, and for AMG 827, our IL-17 receptor antagonist for the treatment of psoriasis and other inflammatory diseases. We expect both of these programs to begin enrolling patients in the near future. With respect to AMG 827, I should note that following a review of interim data, we elected to discontinue our Phase II study in Crohn's disease since we believe it's unlikely that this treatment would benefit such patients. Others have reported the IL-17 antagonism is associated with worse outcomes in the Crohn's disease population. Finally, we continue to make adjustments to our portfolio. As previously announced, we have discontinued development of conatumomab, AMG 655, for the treatment of malignant disease. However, new Phase II data for rilotumumab, AMG 102, our antibody directed against hepatocyte growth factor, which we presented at the ECCO and ESMO meeting in September, suggest that this molecule may have activity in gastric cancer. In particular, we found that rilotumumab administered once every 3 weeks, in combination with traditional chemotherapy, appeared to improve response rates, progression-free survival and the overall survival in the first time treatment of patients with gastric cancer. Additional studies indicate that rilotumumab may be especially effective in patients whose tumors express high levels of c-Met, the receptor for hepatocyte growth factor. We are reviewing these findings very carefully. The continued progression of our late-stage pipeline in oncology, inflammation and in metabolic disease has catalyzed the review of our entire R&D spending profile. While we are encouraged by the success of so many programs, the Phase III cost for the company of these programs are quite substantial. I have previously discussed with you our commitment to ensure that we continue to live within our means. With this in mind, last week, we announced a reduction in R&D headcount. This was necessary to refocus our R&D programs on those efforts likely to have a near-term clinical impact. The burden of restructuring fell most heavily on scientists in early discovery, but was designed to increase the efficiency of our key therapeutic areas. The effects of this sharpening of focus will be evident during 2012 when we also expect to see data from our Phase III cardiovascular outcome study of Sensipar in dialysis patients for secondary hyperparathyroidism and of our Phase III study of TVEC [ph] in patients with advanced malignant melanoma. Kevin?

Okay. Thank you, Roger. We'd now like to open the floor to questions.

Marvin, would you go ahead and review the procedure for asking questions please?

[Operator Instructions] Our first question comes from the line of Mark Schoenebaum with ISI Group.

I'll stick to one. Maybe for Roger, if I may, the anti-sclerostin antibody certainly looks like it's, at least to me, potentially the most interesting thing in the pipeline. And you said you're in discussions with FDA, if I heard you correctly, Roger, around the possible registration program. Could you help us understand what that might look like? What some of the options are? What the timeline for that might be? And maybe Jon, can you remind us of the economics on that?

Okay, Mark. Just with respect to 785, yes, we are discussing Phase III designs with regulatory agencies. Clearly, as an anabolic agent, this is a very different kind of a clinical program from what one sees in anti-resorptive agents. So you're not going to want to give AMG 785 for a very, very protracted period and hence the end points of the study will have to be looked at somewhat earlier because you don't want to confuse the anabolic effect with anti-resorptive effects that might result from the use of traditional agents which would inevitably have to be used thereafter. You can't leave patients with osteoporosis untreated in this setting. So the studies will have a quite different design in that sense from the usual kind of anti-resorptive design. And we'll be prepared to share the study design with you in the very near future because as I say, we'll be beginning those studies very, very soon we expect. With respect to the financial impact, I think it's probably too early to really comment on that. But it'll be much more obvious, I think, as time goes on in that program.

Our next question comes from the line of Eric Schmidt with Cowen and Company.

Let's see. I was hoping that Roger could repeat the name of that new clinical OncoVEX product. I'm just kidding. Bob, in the press release, it mentions some accounting changes with regard to Aranesp and NEUPOGEN/Neulasta. Could you give us a little bit more detail on how the policy has changed and maybe when that actually went into effect?

Yes, I'll take that Eric. We -- this is simply an adjustment to the Medicaid rebate accruals that we've for prior years, and with the benefit of actual experience, we were able to make some adjustments on those reserves and release some of them during the quarter.

So that's a one-time impact, Jon?

That's a one-time impact, yes.

Can you quantify what that was in the quarter in both products?

It was not a material amount, overall, in the quarter in terms of growth rate, it contributed less than a percentage point.

Our next question comes from the line of Chris Raymond with Robert W. Baird & Company. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: Just talking about sort of a commercial question with the newest ESA labels, are your folks in the field seeing any measurable increases in blood transfusions? I mean, one of the theoretical arguments here against removing hemoglobin targets has been that, that would be an issue. But now with a few months under your belt with this new label, can you maybe comment -- are docs seeing now? What is -- what are folks seeing?

Chris, I understand the interest in the question. The feedback at this point is anecdotal, so rather than try to quantify for you the picture until we have data, let me just say that, again, it's anecdotal.

Our next question comes from the line of Ravi Mehrotra with Credit Suisse. Ravi Mehrotra - Crédit Suisse AG, Research Division: It's regarding capital redistribution. Jon, just to make sure I heard you correctly, are you saying you're increasing the guidance you gave in April to now returning more than 60% of net income? And if so, can you give us any indication of how much more? And also could you give us color on the proportion between share buybacks and repurchases? I presume the proportion of dividends is decreasing. And linked to that, finally, are you sticking to your medium term guidance for R&D of 18% to 20% of sales?

That was at least 6 questions. But since they were good ones, we'll answer them, okay.

So on the first point, yes, we will, as I said, we will be over the next few years, increasing distribution to more than 60% of net income. Again just to reiterate what I said, as we look to the capital plan that we announced in April, we believe we can maintain the flexibility we need to grow the business in the way that we want to grow it. And we can improve the returns to shareholders by accelerating the distribution of capital through share repurchases. So yes, over the next few years, we are intending to increase the distribution to greater than 60% of net income. The policy we announced in April with regard to dividend has not changed. We will, and we plan to increase the dividend meaningfully over the next few years.

And let me answer the question about guidance in April of this year. With respect to R&D, we said that we would hold R&D in the 18% to 20% of sales range. In fact, that is exactly what we're doing. This year, in fact, we increased R&D spending by double digits to fund all the programs we have. And I would imagine that next year, we'll be close to the top end of that 18% to 20% range. And we remain very committed to heavy investment in R&D and also holding ourselves accountable for those results. With respect to the capital strategy shift that Jon just explained, I want to tell you that it's rooted in confidence in the business, our cash flow and value of the company and in the context of very, very favorable capital markets' interest rate environment. So this is a, I think, a strong move by us. We retain our strategic flexibility to move the business forward. We just think it makes a world of sense.

Our next question comes from the line of Ian Somaiya with Piper Jaffray.

Just curious to talk about seasonality in the quarter for Prolia. I wonder if there's any seasonality for XGEVA? And as you do make the switch to Part D, should we expect any volatility in the sort of near-term sales?

Ian, first on XGEVA, as I said in my remarks, we're really pleased with the progress and the momentum that we see there. So XGEVA is off to a very strong start, and we're encouraged all around. Prolia was soft in July and August, as I said. That's consistent with the market for osteoporosis generally, also consistent with what we see with new medicines and particularly in the primary care setting. So as we said earlier in the year, we expect the momentum of Prolia to continue to build. We're encouraged by the data that we've seen from September and here early in October as well. So the momentum continues to build, and it also continues to build in Part D. And so we're enthusiastic about the most recent data.

Our next question comes from the line of Jim Birchenough with BMO Capital.

So I'm just trying to understand if there's anything that's changed since April when you talk about optimism regarding long-term prospects? And in particular, is this just a better capital market environment that's driving this and reiterating the same confidence from April? Was there anything you've seen with XGEVA prospects for label expansion or the OncoVEX trial that are making you increasingly bullish on your future outlook.

We -- I'm not going to point to any one thing. There isn't any one thing. I just see it across the broad front whether it's implementing our strategy, whether it's the individual products, whether it's our relations with the government. Just -- it's across the board and we think that this is the right time to make a very strong move on capital. And we also think that there is a possibility to have a more favorable capital allocation, in terms of the balance sheet. It's just every single one of those factors. And, Jon, you might want to make a comment by -- I just think it's across the board.

No, it's really an expression of the confidence in our future, as Kevin said. And the market conditions enabled us to create a more efficient balance sheet to capitalize on that.

Can i ask a follow-up on that, if I may?

Yes, sure.

And that's -- I guess the feedback we get from investors is there's still some angst about the future of EPOGEN and the context of other competitive products that may be entering. Is there anything you've done recently that you feel solidifies your position with EPOGEN dialysis or -- and how reliable is that 20% of 25% erosion base?

Let me talk about EPOGEN for a minute. It's a shrinking product. It's not nearly what it was, say a few years ago. We can handle what happens to EPOGEN in this context. We think we're in a good place. We can see what the future looks like. I wouldn't worry about that factor in a strategic context.

Our next question comes from the line of Matt Roden with UBS.

Given that your next Phase III program to read out as, TVEC [ph], I'm not even going to try to say that one -- the whole name there. But Roger, can you confirm that the single trial is going to be sufficient for registration of metastatic melanoma? And then secondly, I was wondering if you could comment on the rationale around the inclusion criteria, specifically the exclusion of patients with high LDH levels? I think if you look at some previous examples of trials, for example, a tremelimumab or ipilimumab where LDH was -- high LDH was excluded or included. I think it can impact the results. So can you talk a little bit about the rationale around the patients selected for that trial?

Yes, Matt. First of all this trial, as you know, is being conducted under Special Protocol Assessment with the FDA. We have Phase II data from a single-arm study that, as you know, that provided very impressive complete response rates. The Phase III study is like the Phase II study in terms of its overall design. It paralleled essentially completely with the difference being, of course, the size of the study, and as well as the GM-CSF subcutaneous arm, in order to exclude the possibility that expression of GM-CSF is having that beneficial effect. I think it's understandable in that context why the agency would feel extremely comfortable with that kind of study. And again, when launching the Phase III study to try and duplicate the kinds of things that one saw in the Phase II, which were so promising, I think that with respect to the entry criteria, that's what makes the most sense.

Our next question comes from the line of Geoff Meacham with JPMorgan. Geoffrey C Meacham - JP Morgan Chase & Co, Research Division: Question for you on XGEVA and met prevention. So the FDA's focus on overall survival. It was evident that recent ODAC panel. So my question is what's the risk that, that remains a focus for the agency? Now is there anything different or that surprised you on the panel relative to your initial discussions with the agency when they -- when you started once the [indiscernible]?

Geoff, it's Roger. No, no, not really at all. It was kind of a different question that was being addressed by the ODAC panel. And a much more general question that the agency had about how to look at therapies for patients with so-called castrate-resistant prostate cancer, who had not yet sustained metastases. The benefit of providing XGEVA to such patients based on the 147 study, we believe is quite clear. You've had a chance to see those data, and we will have the opportunity, of course, to discuss those data further with the FDA. They're in the midst of their review process. But we think that the benefits are significant with respect to delaying metastases. And we believe the agency will view it that way as well. The survival we show I think is a separate one, and it will be addressed separately. We were not -- we did not design the study to look at survival and the patients who sustained metastases were immediately put on alternative therapies for skeletal-related events. And so there was no way, really, to assess survival. And the agency understood that in terms of the study design.

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

Actually a question about Europe. Maybe you could talk a little bit about what you're seeing in the last few months business-wise? And when will you think we expect over the next 6 months? And maybe a little bit about what you're seeing in regards to possible austerity measures, price reductions, et cetera? For you, which countries are tougher than others?

Sure, Michael. I can appreciate the reason for the question. A couple of things. First, as you saw in our results, our business in Europe continues to grow. So overall, we're pleased with the performance of the business internationally, and we continue to launch new products and benefit from those new product launches. So we're growing internationally. We recognized other significant macroeconomic pressure, and some of that pressure may be reflected in price changes, and we're continuing to watch that pretty carefully. I would observe that, thus far, through the first 9 months of the year, price impact has played out pretty much as we expected it would in Europe, so less than a handful of percentage points for us across the whole of our portfolio. But we're continuing to watch that Michael, as I'm sure you and your colleagues are, for other reasons.

Our next question comes from the line of Geoffrey Porges with Bernstein. Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division: Jon, I'll ask you a question about something I thought I'd never bring up on these calls, which is tax. Could you give us a sense of one, whether a 10.9% is -- should be viewed as recurring in future periods? And then related to that, could you update us on a percentage of your cash offshore and your assumptions about the future ability to repatriate that cash to the U.S., your read on whether that is a viable possibility?

Yes, I think first on the question of the tax rate in the quarter. There was some catch up in the estimate on the foreign tax credit that were applicable to the Puerto Rico taxes this quarter. So the catch up effect in the quarter for the year to date, foreign tax credit offset some of Puerto Rico taxes. So you shouldn't expect to see as low of a rate going forward. And I think we gave you guidance for the full year of 14% to 15%. So that's what you should look at for the year ahead. The reason it so low this quarter was that we were able to refine our estimates on the foreign tax credit that we could use against the Puerto Rico taxes. So hopefully that answers your question. And that we'll give you guidance, obviously, for 2012 when it comes to the end of the year. Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division: And the foreign cash?

And the foreign cash, well, I think we disclosed our foreign cash balances that at the end of the period, we generated substantial cash, both in the U.S. and x U.S. And we disclose the split between the 2. So I'm not sure I can give you more details on that, Geoff.

Geoff, it's Kevin. On the repatriation question, while we believe that it would be a positive step in the United States to find a way within policy to bring this money home, we don't expect that to happen any time soon, and none of the assumptions that we've made has underlined our capital allocation plans assume that, that would happen. Although if it did happen, I think it would be good for America.

Our next question comes from the line of Maged Shenouda with Stifel, Nicolaus. Maged S. Shenouda - Stifel, Nicolaus & Co., Inc., Research Division: Can you quantify the impact of price increases on quarter sales growth, both for the overall business and the non-ESA business?

Maged, let me see if I can give it on tip of my head. In the U.S., what I would say is -- let's see, year-to-date -- I can give you a year-to-date number. That might be the easiest way to convey it to you. Less than a handful of percentage points behind the growth in the U.S. is attributable to price increases. And as I just said a minute ago, looking across the whole portfolio, we've have less than 5 percentage points decrement to pricing from Europe and the international business. We could -- I don't know if I could give to you on the call for the portfolio x ESAs.

Our next question comes from the line of Robyn Karnauskas with Deutsche Bank.

I was wondering if you could comment on trends we're seeing at Enbral. I looks like despite a pretty significant price increase at the beginning of the quarter, you still saw a bit of a decline. I'm just wondering if you could give some color on that?

Sure. Enbrel was up 1 percentage for the quarter. Year-to-date, we're up 6%, and we've maintained market leadership on both rheumatology and dermatology. As regards to the results for the third quarter, the biggest drag on the results, if you will, was the loss of share points in the derm sector. So as I said in my remarks, we lost about 6 percentage points of derm market share during the quarter, owing to the increased competitive intensity there. But we're encouraged by the franchise, overall, pleased with our leading market shares and room in derm, pleased with the impact that our psoriatic arthritis campaign is having for patients. And so we continue to feel very good about our leading position for Enbrel.

Our next question comes from the line of Josh Schimmer with Leerink Swann.

I guess, Europe isn't really exactly in the strongest financial shapes. I'm curious if the biosimilars haven't had better penetration there? To what do you owe their sluggishness and what's really held them at bay?

Well, yes. I think that providers recognize the benefits of Aranesp and Neulasta in particular. I would note that during the quarter, some of the manufacturers of Filgrastim products struggled to supply the market with their products. So we've had some disruption in the competition as a result of that. But by and large, again, I think providers continue to recognize the benefits of Aranesp and Neulasta in particular.

Our next question comes from Yaron Werber with Citi.

So just a question for you about -- help us understand a little bit, what are you seeing that led you to increase the product, the total revenue guidance for the year? Is it driven by one particular product? Is it, just as you said, kind of a feeling that overall, the portfolio is doing better than you expected? Or maybe help us understand kind of what you're seeing for Q4.

It's easy enough. We look at the trend lines in total worldwide revenues. And we make predictions and we'll stand behind those predictions.

Our last question comes from Eun Yang with Jefferies. Eun K. Yang - Jefferies & Company, Inc., Research Division: One pipeline question. On PCSK9 inhibitor, I understand that we're not going to see a Phase II data. [indiscernible] patients until 2013. But for the U.S. approval, do you think that you needed to show a cardiovascular outcomes in the patient population?

Well, I don't think that we know the answer to that. I don't think anyone knows the answer to that. I think that in the past, as you are aware, lowering of LDL cholesterol was believed to be adequate. But all surrogate markers for outcomes are now under review. And so with time, we'll find out whether or not that's useful. We are moving forward very actively with our PCSK9 antibody. AMG 145, we're very enthusiastic about the program. It's behaving extremely well, and we hope to be able to share Phase II data with you in not too long a time. And as we have those data available, we'll begin to embark on our Phase III program, which will certainly be informed by discussions with the FDA.

Well listen, let me thank everybody thank you for your participation in our call this afternoon. If you have any follow-on questions, comments, feel free to call me. I'll be around for the next several hours. Have a good day.

Ladies and gentlemen, this concludes Amgen's Third Quarter Earnings Conference Call. You may now disconnect.