Amgen Inc. (AMGN) Q4 2011 Earnings Report, Transcript and Summary

My name is Marvin, and I will be your conference facilitator today for Amgen's Fourth Quarter and Full Year 2011 Financial Results Conference Call. [Operator Instructions] I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Thank you, Marvin. Good afternoon, everybody. I would like to welcome you to our Q4 and full year 2011 results conference call. The objective of this call is to review our solid performance in 2011, focus on our outlook for 2012 and provide some additional details on the transaction that we announced this morning with Micromet. I'm joined today by Kevin Sharer, our Chairman and CEO, and several members of our management team, including some who are participating in such call for the first time. Kevin will provide the introductions today, although we'll still keep our prepared comments brief and focus only on those that provide added color beyond what's in our press release. We'll use slides for our presentation today. These slides have been posted on our website and a link was sent to you separately by e-mail. I would like to remind you that our comments today will be governed by our Safe Harbor statement, which in a summarized form means that through the course of our presentation today, we may make certain forward-looking statements and actual results may vary materially. I will also note that in connection with the U.S. securities laws and the rules of the Securities and Exchange Commission, we will not be discussing the terms of the Micromet transaction on this call. For more information on the terms of the merger, please review our Form 8-K that was filed earlier today to which the merger agreement with Micromet is attached. Shortly, we'll also follow the tender offer statement on Schedule TO, including the offer to purchase. So with that, I would like to turn the call over to Kevin.

Thank you, Arvind. Good afternoon, everyone, and thank you for joining us today. Well, we began 2012 as a year of transition, transition in leadership and transition to more growth across a variety of fronts including financial, strategic and organizational areas. You'll hear about all of that today in our more detailed remarks and in the question and answers. First, I would like to thank the many Amgen staff who are listening on this call and who will hear it later for a very strong 2011. I really, really appreciate what we accomplished. It positions the company well for the future, and we fulfilled our mission again. It's a job really well done, thank you. Although 2012 is only 26 days old, we're off to a good start. We're very pleased with our acquisition of Micromet. We'll talk more about that today, but it advances our pipeline and our fundamental R&D capability. We should guidance today that puts us well on the path to our 2015 goals and beyond. I feel good about that. And I also have to note the recent increase in stock price. It's about time. I would like to publicly thank Roger for his service these 11 years. Roger is with us today. You know him well. He has transformed R&D at Amgen. He's delivered for millions of patients and has been a superb leader of the business in his function and industry. We'll miss him, but we'll benefit long after his transition from his many, many contributions. Thank you, Roger. Sean Harper has big shoes to fill. However, I have total confidence he can do just that, and Sean is with us today. We're also joined today for the first time by a new executive team member, Tony Hooper, who joined us a short while ago, but it seems like a long time. He's fully integrated on to the team, and we're very, very happy to have him with us. Tony, welcome. And Bob and I are working very closely to have a seamless transition, and we're pleased with our progress. The company continues to move ahead and get stronger. I'd like to celebrate and acknowledge and say that Bob earned this new job in every way. And I look forward to passing the reins to him soon. So Bob, let me turn the floor over to you to talk in more detail about your views of how we did in 2011 and what's on tap for 2012. So Bob?

Thank you. Thank you, Kevin. As you've seen from our results for the fourth quarter, we ended the year with momentum, and we expect 2012 to be even stronger. I'll touch on some of the highlights. We entered 2012 with our Neulasta franchise growing, with Enbrel maintaining its market leadership and more stable outlook for EPOGEN, particularly now that we have long-term contracts in place. Prolia and XGEVA are obviously the important part of our outlook for 2012 and beyond. And we will build on the solid foundations that we have established for these brands with launches expected in new countries throughout 2012. We are obviously looking forward to the upcoming ODAC review of XGEVA for bone mets prevention, but I think it's important to emphasize the early progress that we've made and the biggest opportunity for XGEVA, which is with patients whose cancers have already spread to bone. In this setting, XGEVA is both driving the growth of the market and taking share, a trend which we expect to continue. Our other products in the growth phase, including Sensipar, Vectibix and Nplate, contributed nearly $1.5 billion in revenues last year with healthy double-digit growth rates, and the outlook for them in 2012 is strong. A number of important events this year will help inform our longer-term outlook, in particular, the Sensipar EVOLVE outcomes data will be available later this year, as will the interim Phase III data for T-Vec in melanoma, as well as important Phase II data for AMG 785 and AMG 145. We're making progress on executing against the strategy we laid out for you in our business review in April. Our partnership with Watson, announced in December to develop and commercialize a portfolio of oncology biosimilars strengthens our position to capitalize in the growth potential of this new market opportunity. And of course, today we've announced an important strategic move with Micromet. Advancing innovative medicines for grievously ill patients is central to our strategy and that is what Micromet represents. We're impressed with their lead molecule and the broader potential applicability of their technology, and we believe we can add value to what they've created with our clinical capabilities in hematology and oncology, our expertise in developing and manufacturing complex, novel biologics and our marketing expertise in this field. I'll now turn it over to Jon who'll walk you through in detail our financial results for 2011 and provide clear guidance for 2012. Jon?

Thanks, Bob. I'll focus on providing highlights of our results for the fourth quarter and the full year, discuss our balance sheet, cash flow and recent capital allocation activities and then provide our financial guidance for 2012. You can see our fourth quarter results on Page 6. Product revenues grew by 4%. Prolia's growth accelerated in the quarter to 60% compared to Q3 and XGEVA continued its strong trajectory growing 30% over the same period. EPOGEN sales grew 2% compared to the third quarter, starting to demonstrate stability following the dosing adjustment on reimbursement and label changes during the year. Our Filgrastim franchise led by Neulasta continued its momentum, growing 7% relative to the fourth quarter of 2010. And growth-phase products Sensipar, Vectibix and Nplate delivered 15% growth versus 2010. Operating expenses increased 6% in the quarter. This was primarily driven by the Puerto Rico excise tax and cost of sales for which we received a corresponding foreign tax credit against the U.S. federal income taxes and the U.S. health care reform excise fee. Excluding Puerto Rico excise taxes, cost of sales improved to 14.4% from 15.1% a year ago due to continued productivity efforts. And adjusted earnings per share on the quarter grew by 3% to $1.21. This benefited from a 9% year-on-year reduction and average shares outstanding and the lower tax rate due to the foreign tax credits received on Puerto Rico excise taxes. A few highlights on the full year, turning to Page 7. Product sales grew 4%. This was delivered by good growth across our portfolio, partially offset by 19% decline in EPOGEN sales in the U.S. Tony is going to give you more color on the momentum that we're carrying into 2012. Operating expenses on the year grew by 11%, just over half of this was driven by the Puerto Rico excise taxes, the new health care reform excise fee, foreign exchange movements and higher Embrel profit share payments in line with the higher sales. The increase in operating expenses was in development costs to support our growing late-stage pipeline, launch cost for XGEVA and Prolia and expansion of our international operations. Adjusted earnings per share on the year grew 2% benefiting from a lower tax rate and lower average share count. Key balance sheet and cash flow data is summarized on Page 8. Cash balances grew to $20.6 billion at the end of December and total debt amounted to $21.6 billion. During the year, we raised $10.5 billion in additional debt through public bond offerings with an average fixed rate coupon of 4.1% and an average maturity of 15.3 years. We also repaid $2.5 billion of convertible notes that matured in February. Free cash flow for the year was $4.5 billion compared to $5.2 billion in 2010. The decrease was primarily driven by a combination of increased working capital to support the launch of Prolia and XGEVA, higher interest expense and the prepayments of Sensipar royalties that I highlighted on our last call. And then during the year, we repurchased 144 million shares or 15% of our outstanding share capital at an average price of $57.55 and at a total cost of $8.3 billion. We currently have $5 billion remaining under our board-authorized share buyback program, and we plan to continue to repurchase shares in the open market. Return on equity for 2011 was 23% compared to 22% in 2010. The full benefit of our recent share repurchases will be reflected in further improvements in return on equity in 2012. Finally, we introduced the quarterly dividend in the third quarter of 2011, and in December, we announced a 29% increase in the first quarter of 2012 dividend payment to $0.36 a share. As we communicated in April, our plan is to increase the dividend meaningfully over time. Let me now turn to our financial guidance for 2012 on Page 8 (sic) [9]. First, we expect to deliver revenues of between $16.1 billion and $16.5 billion. And this guidance reflects our confidence in the growth prospects across our portfolio. We expect adjusted earnings per share of $5.90 to $6.15. This reflects our plan to hold growth and operating cost at or below revenue growth, and this includes the consolidated cost of Micromet and the effect of further share repurchases. Capital expenditures for 2012 will be approximately $700 million. Our guidance on the adjusted tax rate is 14% to 15%. And excluding the foreign tax credit to offset the Puerto Rico excise tax and cost of sales, this would amount to 19% to 20%. And so in summary, we're making good progress towards the 2015 financial guidance that we provided to you in April. So with that, I'm delighted now to introduce my colleague, Tony Hooper, who's joining our earnings call, as Kevin mentioned, for the first time. Tony?

Thank you, Jon. Let me start by saying I'm delighted to be part of this new management team, and I really look forward to taking Amgen into the next decade. So on Slides 11 and 12, you'll find a summary of our global sales performance. Revenue has been characterized by demand trends, delivering record sales for both the quarter and the full year. We expect these trends to continue for 2012. Looking now at some of the products in specifics. In the U.S., we continue to see unit growth for Neulasta; however, overall Filgrastim growth was fueled primarily by price. The decrease in international Filgrastim sales was due to a unit decline for NEUPOGEN attributable to biosimilar competition. On the other hand, Neulasta has maintained unit and value share on a year-over-year basis. As we move into 2012, we will continue to focus on first and every cycle treatment as the best way to reduce risk of febrile neutropenia. Enbrel remains the market leader in both rheumatology and dermatology segments despite share losses that are consistent with recent quarters. We are confident in our strong Enbrel patent, and we are revealing both our strategy and our refill allocation for this exciting asset. The EPOGEN sales decline continually driven by the implementation of bundling, product label changes and proposed CMS actions, which were announced at the end of the second quarter. Fourth quarter EPOGEN sales, however, grew 2% on a sequential basis. As you know, we signed a 7-year exclusive supply agreement with Avidia and a multiyear nonexclusive agreement with FMC. We believe that these agreements reinforce the value that EPOGEN delivers for patients and practitioners. Importantly, we saw signs of dose stabilization in quarter 4. As we enter 2012, we expect EPOGEN performance to return principally by price as we expect only minor residual dose declines. While the large dialysis centers change the usage of EPOGEN rapidly in 2012 in response to label and reimbursement dynamics, decreases in the prescribing of Aranesp for renal insufficiency have occurred more slowly. We expect these changes in Aranesp prescribing practice to continue early into 2012 but to stabilize by the middle of the year. As Bob said, our growth-phase products, Sensipar, Vectibix and Nplate, showed solid growth with combined 2011 sales exceeding $1.4 billion. Each of these products received potential growth, the EVOLVE with Sensipar, an expanded European label for first and second-line COC for Vectibix and the FDA amendment of the Nplate REMS which will make it easier for physicians to prescribe Nplate for appropriate patients. Turning to our global launches of denosumab, both Prolia and XGEVA delivered a strong fourth quarter. XGEVA grew 30% versus the third quarter. This growth continues to be driven by share gains and overall SRE segment growth. In the U.S., XGEVA ended the quarter with unit share of 28%. The SRE segment grew 12% on a year-over-year basis in units. On the international front, XGEVA was launched in Germany and a few smaller countries and is off to a solid start. In 2012, we expect to launch in most European markets and to continue our growth in the U.S. Prolia grew 60% globally versus the third quarter reflecting strong performance in Germany and a strong quarter in the U.S. In the U.S., U.S. Prolia sales were up 68% versus the third quarter. We are seeing new patient growth, as well as repeat patient growth. As expected, we've been granted a permanent J-code, which allows easy access to bindable [ph] customers, and we plan to launch our DTC TV campaigns later this year. As we enter 2012, and patients' deductibles reset, we expect we could see some softness in quarter 1 with a strong resurgence in quarter 2. Internationally, Prolia sales grew 45% versus the third quarter. During the quarter, we launched in Italy and Spain. We've now launched in markets representing in excess of 75% of the sales opportunity. Let me focus on international for a moment. We continue to maintain share against biosimilar competitions for Aranesp and Neulasta and have maintained our price premium for both. As you know, the macroeconomic challenges in Europe have impacted our marketplace, and we continue to keep a close eye on the dynamics. However, in 2011, the price degradation we saw in these markets was consistent with what we've experienced in recent years, and we expect basically the same trend in 2012. The strength of our recent launches, as well as our expansion into new markets, puts us in a good position to experience growth in our international business. For the U.S., I'd note that our product portfolio ended the quarter with wholesale inventory in the normal range. So in some, we are pleased that the execution against our commercial strategy in 2011 resulted in underlying trends that have allowed us to continue to grow sales as we absorb the changes in our ESA business. In particular, we believe our ability to deliver solid performances for Enbrel and Neulasta, as well as continued to successfully launch and grow XGEVA, Prolia, Sensipar, Vectibix and Nplate will deliver strong growth in 2012. Now let me hand it to Roger.

Thanks, Tony. This afternoon, I will provide an update on regulatory and development activities in the fourth quarter, comment on some of the important events that we expect will occur in 2012. I'll also provide a brief overview of Micromet, a pioneering biotechnology company with a novel therapeutic platform exemplified by a promising development candidate for the treatment of acute lymphoblastic leukemia and other hematologic malignancies. As you are aware, and as Kevin mentioned, this morning we announced that Amgen has entered into a definitive agreement to acquire Micromet in an all-cash transaction. Turning then to Slide 14 with respect to XGEVA, as Tony mentioned, we've been making good progress in gaining approval for XGEVA and all major jurisdictions. In the fourth quarter, working with our partner, Daiichi Sankyo, we completed discussions with the Japanese regulatory authorities leading to the approval of denosumab as landmark for the reduction of skeletal-related events in patients with metastatic bone disease, which was announced last week. We have also been engaged in constructive conversations with the FDA regarding XGEVA in advance of the Oncologic Drugs Advisory Committee or ODAC meeting, which is scheduled for February 8. XGEVA is the first agent to show an improvement in bone metastasis-free survival in men with castrate-resistant prostate cancer. As such, there is no precedent for regulatory approval in this indication. The data that support our submission were published in significant part in The Lancet in November of last year. An editorial that accompanied this publication posed questions about the clinical significance of the observed 4-month delay in the appearance of bony metastasis, and this general topic, that is, what constitutes a clinically meaningful effect in patients with castrate-resistant nonmetastatic prostate cancer was discussed at a prior ODAC meeting in September of last year. Hence, we certainly expect that the FDA will seek advice regarding the clinical significance of an improvement in bone metastases-free survival. We look forward to these ODAC discussions as we continue to explore the best way to employ XGEVA, which is, of course, already approved in the United States to reduce skeletal-related events in men with metastatic prostate cancer and relieving the burden of bony involvement by prostatic malignancies. As noted on our slide, in the fourth quarter, the European Commission authorized the use of Vectibix as first-and second-line treatment for patients with metastatic colorectal cancer. Vectibix is our fully human antibody directed against the epidermal growth factor receptor, which has been previously approved in major markets for the treatment of metastatic colorectal cancer in patients who have failed other therapeutic regimens. In the fourth quarter, our regulatory affairs group filed an sBLA with the FDA for the use of Prolia to treat osteoporosis in men. The PDUFA date for this indication is September 20, 2012. We have previously announced top line data indicating that Prolia treatment increases bone mineral density in such patients. In addition, we received approval in the third quarter for the use of Prolia in men receiving androgen deprivation therapy for prostate cancer. In this population, Prolia treatment was shown to reduce the risk of vertebral fractures. During our third quarter earnings call, I noted that severe shortages in the availability of DOXIL, a chemotherapeutic agent from Johnson & Johnson, were affecting enrollment in one of our 2 studies of AMG 386 in ovarian cancer patients. Because of this, we were forced to suspend enrollment in this Phase III study in the fourth quarter. However, our pivotal study of AMG 386 in this indication, which employs combination therapy with paclitaxel, continues to enroll ahead of schedule. This study and our study of AMG 479 in pancreatic cancer should complete enrollment by the end of 2012. Turning then to key events that we expect during 2012, Slide 15 shows that we expect to see data from our Phase III outcome study, the EVOLVE trial, by mid-year. This is an event-driven study in which we asked whether the treatment of secondary hyperparathyroidism with Cinacalcet reduces all-cause mortality and cardiac morbidity as determined using a composite endpoint. Later in 2012, we expect that interim data will become available from our study of talimogene laherparepvec, the oncolytic virus therapy known as T-Vec. We used data related to durable responses as defined in our Special Protocol Assessment with the FDA. You will recall that enrollment in this Phase III study was increased to provide more power for observing an overall survival signal. However, we do not expect to be able to examine survival data until sometime in 2013. Two important Phase II programs will also provide data in 2012. We previously announced top line data for our large Phase II study of AMG 785, the sclerostin-binding antibody that increases bone formation in women with postmenopausal osteoporosis. These data will be presented in scientific meetings later in the year. And we will also have the opportunity to review primary data from our fracture healing studies where we asked whether administration of AMG 785 assists in resolution of tibial or hip fractures. We also expect to see data by the end of the year from 4 studies of AMG 145, our fully human antibody directed against PCSK9 that has been shown to lower LDL cholesterol levels in patients with hypercholesterolemia. Our studies explore the efficacy of AMG 145 as monotherapy or in combination with statins in statin-intolerant patients and in patients with heterozygous familial hypercholesterolemia. Finally, I wish to say a few words about our announced agreement with Micromet. Under the leadership of Patrick Baeuerle, their Scientific -- Chief Scientific Officer. Micromet has pioneered the development of Bispecific T-Cell Engaging antibodies called BiTEs. As shown on Slide 16, a typical BiTE antibody combines an antibody that activates cytotoxic T-lymphocytes shown at the top in red, with an antibody that binds an appropriate target on the surface of tumor cells. The resultant chimera, in this case exemplified by Micromet's lead molecule blinatumomab, binds the tumor cells in the patient and recruits cytotoxic T-cells, a critical part of normal immune defense to eliminate these tumor cells. This approach is powerful because cytotoxic T-cells are remarkably active, but as well because simulation of these cells yields a memory cell population that remains active over time. In the case of blinatumomab, these cytotoxic T-cells kill B lymphocytes including those cells that expand illegitimately in cases of B-lineage acute lymphoblastic leukemia. As shown on Slide 17, Phase II data presented by Micromet scientists late last year at the American Society of Hematology meetings, show that nearly 70% of patients with relapsed or refractory acute lymphoblastic leukemia achieved a complete response or a complete response with partial hematologic recovery. This level of activity in such grievously ill patients is quite remarkable. Indeed, in these responding patients, tumor cells became undetectable after treatment. Median survival in this study had not yet been achieved with a median follow-up of 9.7 months. This is far longer than what has typically been achieved with contemporary combination chemotherapy. As with all highly active cytotoxic therapies, there are adverse effects associated with blinatumomab treatment. However, at this early stage and given the impressive efficacy observed to date, these adverse effects appear manageable. In short, we believe that blinatumomab is a rare asset, a therapy that offers enormous promise for patients suffering from an aggressive, grievous malignancy where alternative therapies do not now exist. And not surprisingly, as shown on Slide 18, the BiTE platform has attracted great interest from numerous biopharmaceutical partners, including, of course, Amgen itself. We feel confident that the ability of BiTE antibodies to activate cytotoxic T lymphocytes and to trigger a memory response in these cells will prove valuable in a variety of disease settings. Hence, I'm delighted that our colleagues from Micromet will be joining Amgen and that we, at Amgen, by virtue of our special expertise in the development and manufacture of complex protein therapeutics will be able to provide the resources necessary to develop the BiTE platform for the broader benefit of patients around the world. I cannot complete my discussion without noting that the fourth quarter of 2011 will be my last full quarter at Amgen. After 11 years, I'm proud to be able to hand over the reins to my Chief Medical Officer, Sean Harper, who is with me here today. Through the work of thousands of very talented Amgen scientists, I have had the privilege of introducing new therapies that improve the lives of patients suffering from rheumatologic disease, osteoporosis, autoimmunity and the depredations of malignancy. These 11 years have passed in an instant. And in many ways, I'm tempted to continue for another 11 years, but I recognize that there is an appropriate time to let a new generation address these new challenges. I'm deeply grateful for the opportunity that I have had to serve the cause of biomedical research from this outpost, and I look forward to cheering the accomplishments of Sean and the entire Amgen team as they endeavor to bring our deep pipeline of promising new medicines to patients who desperately need better therapies. I close by thanking all of those who have helped bring us to this point. I have been inspired everyday by your efforts, and I will deeply miss working with Amgen employees around the world. Kevin?

Thank you, Roger. That was from the heart, I can guarantee. But now I'd like to open the floor to our normal question-and-answer session. And Arvind, you might state the rules of engagement here and we'll take it from there.

Yes, that's fine. Marvin, let's go ahead and open it up for the Q&A session. Before you do, a special shout-out to Ravi Mehrotra from Credit Suisse who's celebrating his 40th birthday today, and he told me that he could think of no better way than to be in a conference call.

Get a life.

So Marvin, with that, would you review the procedure for asking questions on the call?

[Operator Instructions] Our first question comes from the line of Chris Raymond with Robert Baird. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: Question is on EPOGEN. So I understand this may still be a fluid situation. I was struck by your words and the stabilization of the business. And some of our checks have indicated that throughout last year, a lot of docs started to see an increase of blood transfusion actually by a significant amount and they directly blame the label and the QIP for this dynamic. So I guess, number one, are you getting that kind of feedback? And number two, is it possible this might be a driver of that stabilization? How do you think things play out with that?

So this is Tony. Let me start with my short knowledge and some of my team members can help me. There have been discussions around this being an issue and physicians questioning it. We have not seen any real data yet. I understand there's been some trials that have been run or there's a collection of some external data taking place, which could be presented in the next couple of months or so. Net-net, however, I think just the overall practice based on the changes in the label and the reimbursement, physicians have now got to a level where they are comfortable with prescribing but there could be a challenge when we start to see some of the outcomes of the data.

What I would add to what Tony has said, Chris, this is Bob, is that we expected the large dialysis clinics would quickly change their protocols followed the changes to the label and reimbursement, and we saw that. We think the bulk of the changes were implemented very quickly. And we expect that there will be some residual carryover early in 2012. We think the bulk of the changes in the way patients are being treated has already been made. And the feedback that we're getting from customers in the clinics is that they will expect to have a rather more stable utilization of EPO this year.

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

A question actually for Roger and maybe even Sean, if he's there. When you think about your business development strategy and then, obviously, you did Micromet today, where do you think the most interest lies as you go forward? Is it early-stage, mid-stage, late-stage stuff? How are you thinking about that?

Well, Michael, we're quite opportunistic. We're interested in valuable programs that we think can make a real difference to patients suffering from grievous illness. In some cases, that will be because of a new discovery that really isn't quite an early stage. It is unusual, of course, to find very late-stage opportunities available because there are so few of them, that just is a fact. But we look at the totality of programs from extremely early programs, which sometimes we approach through investment or venture activity, to later stage programs that already have demonstrated as blinatumomab has clinical efficacy in a Phase II or even later program. So we look at the totality of them. There's no special formula.

Our next question comes from the line of Rachel McMinn with Bank of America.

Just wanted to ask your view on operating profit. I think what you were saying is that you don't expect your expenses to grow more than revenue. So is it fair to assume flat operating profit this year? And as a corollary to that, when we think about your R&D budget, is Micromet something that you can really just absorb into your current R&D budget?

Rachel, let me take that one. I think what I said was we expect to hold operating expense growth in line with or below revenue growth. So you usually expect operating expense growth from the year to be no more than the revenue growth that you see for the business, and that's indicated by our guidance. And then on R&D, the guidance fully reflects, as I mentioned, the cost that we foresee for Micromet within R&D, and in fact, for Micromet as a whole. In the context of the 18% to 20% guidance that we've given previously, I would expect that this year would be towards the top end of that guidance.

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

But more importantly, just a question on assumptions for Sensipar in the face of EVOLVE data. Assuming it showed an outcomes benefit, how should we think about the incremental opportunity as we head into oral drugs being bundled in 2014? Is this something that would offset the bundling impact? Do you think you could grow in the context of bundling? Just trying to get a sense of what the opportunity could be there.

I don't think we can actually speculate at this stage what it will be until we see the data, I'm afraid.

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

This question of mine is actually for Roger or Sean on AMG 785 and fracture healing. I'm wondering what gives you confidence in this indication after Forteo, I think, has failed some trials here. Maybe you can discuss the profile you're looking for? Is this accelerated healing in all fractures or improved healing for refractory fractures? And what's the commercial opportunity you're looking at?

Well, Josh, what gives us confidence, the extent one ever has confidence when you're embarking upon a Phase II study is that the preclinical data are so strong. And these, of course, have been described in various research publications and at ASBMR meetings. So the data for sclerostin inhibition, in terms of reducing the frequency of nonunion, are very impressive. And in fact, what we've shown preclinically is that by inhibiting sclerostin, you can fill in a very substantial gap in bone that's introduced via an osteotomy. So it's really quite an impressive result. Now will that translate into clinical improvement with respect to the frequency of nonunion, the ability of patients to bear weight early, reduction in pain, et cetera? We don't know. We're testing that both in tibial fracture and also in hip fracture, and time will tell. But those are the kinds of things that we would like to see as a result of our clinical trials.

Our next question comes from the line of Yaron Werber with Citi.

So the question has to be with EPO and help us understand maybe just a little bit. The DOPS [ph] database, which is obviously not perfect, did indicate that volume was down maybe as much as 11% in Q4 over Q3. So how much of the -- so are you seeing sort of the same volume hit? And the question really is how much is price playing a factor, given the recent new contract with Avidia? Based on our work, we do think that the price is going to go up with Avidia this year. So just trying to really put it together. How much of it is volume versus price?

So the data we have for the fourth quarter shows a 2% unit growth in the quarter itself. The actual details of a market demand, I have not yet seen it. We'll probably see those in the next couple of weeks.

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

I had a question on Micromet. I would agree with Roger. I think that the data on their lead product is as exciting as the platform. And I was hoping if you could speak to the platform just in terms of what are their indications we'd be able to pursue, and maybe just give us some sense of timelines.

Yes, okay. The platform as you indicated is extremely interesting because redirected lysis has been something that molecular immunologists have wanted to achieve for a long time to target cytotoxic T cells to direct the elimination of cell populations in people, but it's not been easy to make work. And Patrick Baeuerle and his team have done a great job with that. That opens up a whole set of solid tumor indications and potentially other indications that could be approached using that platform. And that's the basis of our partnership with them, which we announced last July and also the basis of many other partnerships' arrangements. Essentially, it comes down to picking the right targets. What's been shown is that you can harness the power of cytotoxic T lymphocytes to kill tumor cells. So you have to find the right targets and then demonstrate in the clinic that those targets actually can be destroyed without undue adverse effects. Most of those programs are at a preclinical stage. There are some early clinical data that are coming in with respect to another program, the MT110 program. It's an early Phase I situation and a few other things. But I think the opportunity that exists there with respect to that platform is simple. It's a better way to kill tumor cells, and now we have to go about showing that we can kill the right cells in patients suffering from malignancy.

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

I was just wondering on AMG 145, Roger, can you help us understand the differences between that particular antibody and other PCSK9 antibodies in development, if you think there is a notable difference? And what might be the schedule to actually start Phase III? And if I can slip one in, on the tax rate, is that tax rate sustainable in the out years?

So I'll have Jon answer the 145 questions and I'll answer -- with respect to 145, and I'll hand it over to Jon, since he slipped it in, of course, there are no head-to-head comparisons amongst the different PCSK9 antagonists, and hence, we can't really comment on how one compares to another. We are deep in the midst of very large Phase II studies. You've seen them on clinicaltrials.gov. They will deliver a very large amount of data in 2012, which will provide the basis for end of Phase II discussions with FDA that can lead to a Phase III program. We're excited about what we've seen to this point. We believe that this can be a very important addition to the therapeutic armamentarium for cholesterol reduction in patients at risk as a result of hypercholesterolemia for adverse cardiovascular events. But we need to wait and see the Phase II data. Jon?

Yes. And now to the tax question, I guess we are carrying part of our tax burden within cost of sales now as a result of the Puerto Rico excise taxes. And I've mentioned, we get an offset against that in our income tax line. So the total tax burden that we're carrying on our P&L is 19% to 20%, and you see 14% to 15% of that on the income taxes line. So I think the answer to the question is 19% to 20% is broadly a sustainable tax rate, at least, for the foreseeable future.

Our next question comes from the line of Ravi Mehrotra with Crédit Suisse. Ravi Mehrotra - Crédit Suisse AG, Research Division: The question is on XGEVA and the prevention indication. Can you just walk us through what you see as the major commercial hurdles and opportunities? And specifically on the hurdles, how do you maximize the leverage into that new physician group? And on the opportunities, where do you see the real world patient population size-wise?

I mean, first, obviously, we don't have a label yet. And so obviously, we look forward to having the opportunity to discuss this with the ODAC, and we will see where we come out. We have a PDUFA date, as you know, in April. But faraway biggest opportunity for us, of course, is in treating patients whose cancers are already spread to the bone. We're very pleased with the progress we're making there. As I said in my remarks earlier, we're pleased with the growth in the market, which means that we were reaching more patients and patients who weren't previously being treated now have access to medicine, in particular XGEVA. And we're pleased with the share that we're taking. But that is far and away the larger opportunity. And so why don't we wait and see what the FDA review of XGEVA in the setting of metastasis prevention provides by way of the label and then we'll address it at that time.

Our next question comes from the line of Eun Yang with Jefferies. Eun K. Yang - Jefferies & Company, Inc., Research Division: My understanding is that Amgen currently has few biosimilar products in the early stage of clinical development. Can you tell us what the targets over those products are?

That's correct, Eun. We do have molecules in development. We're not going to share details about the specific programs at this point. As you know, in December, we announced a partnership with Watson to develop and commercialize several oncology antibodies. And I hope you'll respect that, for competitive reasons, we're not going to share details any earlier than we need to about the programs that we're advancing. But we're excited about the potential for growth from biosimilars. And I would point out that the opportunity for us is not just in the U.S. but obviously globally, and we see an opportunity to leverage the biosimilars as we seek to expand internationally into new markets.

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

Question, I guess, for Jon. Looking for a bit more guidance on 2012, specifically what the share count assumption is, whether you think you can further improve gross margins and whether XGEVA bone met prevention label is incorporated in the guidance.

Yes, so in terms of share count, I think as we have consistently said, we don't preannounce the amounts and timing of share repurchases. As I mentioned, we do have $5 billion of authorized programs still in place. And we do intend to continue buying in the open market, and I have reflected our expectations for that in the guidance. But what I can't do for you is give you the specifics on preannouncing our activities. But we have got a $5 billion program to complete sales. On gross margins, I think the guidance we gave for 2015 was that we expect cost of sales to be 13% by 2015 or in the order of 13% by 2015. You saw progress over this last year. If I could strip out the Puerto Rico tax effect in there, we've improved from 15% from 14% just over the last year, and I would expect -- and I'm confident we're on the road to that 13% by 2015. I'm sorry, what was your first question?

On XGEVA, where the guidance included the bone mets prevention. Obviously, we're not giving product-specific guidance on this call and there are puts and take across the product range. And the guidance we've given you, we think, reflects our best view of where we are heading into 2012. So as we said at the outset, we're pleased with the momentum that we bring to the start of the year, and we're excited about the opportunity to accelerate revenue growth.

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

The question is on the revenue guidance, and Bob, I think you may have just answered the question, but I was hoping that you could maybe talk a little bit about what's in areas we need to play out to achieve the higher end of guidance. I think with stream numbers being basically at the bottom end of the guidance, I think we have sense of what the scenarios look like but I was hoping that you might be able to give more color as to what your thinking is on the top end?

Yes, I think we tried to give you a sense of why we feel pretty optimistic at this stage in the year and the optimism is borne by our -- is underpinned by the strength we see in the core franchises. We're pleased with the progress that we're making and growing Neulasta globally. We're pleased with the position we have with Enbrel. And again, we think the ESA franchise will be more stable that it has been in past years, that the products that we have recently launched, which are growing. Obviously, XGEVA, Prolia, Sensipar, Vectibix and Nplate are all performing well. We have high expectations for the growth in most products in 2012 in established and emerging markets. So really across-the-board, while there are puts and takes, we think the guidance we provided reflects our best view of what the likely outcome for the year is.

Our next question comes from the line of Sapna Srivastava with Goldman Sachs.

This is just following upon the acquisition strategy question, which was asked earlier. Could you just give us more color on the your thought process, whether you're focused more on U.S. assets or ex-U.S. assets given your cash balance? And if you were able to use the U.S -- ex-U.S. cash for the Micromet deal?

Sure. Again, I think your -- our acquisition philosophy remains to try to find innovative medicines that can make a difference for patients who are grievously ill. So what you should expect from our licensing and our business development activity more generally is that those are the kinds of molecules and opportunities we're going to be looking for. Specifically, with respect to the ex-U.S. cash, Micromet is a U.S-listed company, so we're using onshore cash to fund that acquisition. But as an ongoing investment, ongoing R&D expenses for Micromet and its team in Munich, obviously, we'll be able to use offshore cash for that. Last year, early in the year, we made an acquisition of a business in Brazil. We're pleased with the early results from that, and that was the other focus in some of our acquisition activity to the extent we're able to find small opportunities in markets where we're trying to expand and to the extent we believe we can leverage those transactions to launch our own innovative products. We'll continue to look at transactions like that. But they would -- I think you should expect that they'll be on the smaller side of things just like the Bergamo transaction that we did last year in Brazil.

Our next question comes from the line of Geoffrey Porges with Bernstein. Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division: I'll ask you the question that you've always refused to answer, which is to name your favorite child in the portfolio. But also could you give us a little bit more color about 785 and 145? What sort of dosing schedules, particularly for sort of chronic administration, we should be expecting for those 2 antibodies?

Yes, sure, Geoff. We are still in the midst of studies that will help to define dose and schedule for both of those programs. And there are -- there are aspects for the programs, particularly for 785, that relate not only to dose and schedule the way you defined it, but also for how long one should treat patients with 785 in order to gain the maximum effect. So those things are all being addressed, but we're optimistic that one can have monthly scheduling with AMG 785. It is possible it could be even less frequent, and time will tell as far as that's concerned. Over time, one would expect also, with AMG 145, that we should be able to get to that kind of schedule although it may be that, early on, when we'll be working with something closer to every-2-week dosing. Again, time will tell as we see the results from our Phase II studies. And no, I won't name my favorite. We want all our children to go to college and...

Our next question comes from the line of Geoff Meacham with JPMorgan. Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division: Looking at Aranesp, the trends exiting 2011 don't look that stable. So I just wanted to get your general sense as to the assumptions for Aranesp in 2012. What the drivers are there? And then maybe at a higher level, do your assumptions for this year imply any different rate for biosimilar penetration than we've seen in the past.

So as I said earlier, it was clear that the large dialysis centers moved quite rapidly in adjusting the EPOGEN label. But at the same time, the decreases in prescribing Aranesp for renal insufficiency continued a bit more slowly. We see that now evolving between now and the middle of next year and then stabilizing as we go forward. As regards to biosimilars in Europe, we've continued to project the same type of interaction we have to date. We've managed to maintain our price premium, and we are holding pretty well in terms of the market share.

Our next question comes from the line of John Sonnier with William Blair. John S. Sonnier - William Blair & Company L.L.C., Research Division: I'll ask the beady question slightly differently, maybe for Roger. Over the past year, you guys have made significant I would argue [ph] accelerating investment in the area of next generation antibodies. You know, the solid tumor transaction, the ImmunoGen TAP transaction, now the acquisitions. So the question is, I'm trying to get into your strategic thinking behind the investment. Is the target driven? Is it IP driven? Is it capability driven? There just appears to be a broader overarching strategic intent to build critical mass in this broad area.

Yes. The fact of the matter is that this is a strategy that has evolved over a very long period of time. When I joined the company, Amgen had already had a very strong reputation in supportive care and part of the push was to add to that a therapeutics capability, which we did by developing drugs that block signal transduction or growth factor signaling in tumors. And what we're doing now, is we've said, "All right, that is one way of trying to eliminate tumors, to kill them by depriving them of things that they need to grow." But another way of doing this is to actually kill the tumor cells themselves. And if we could harness an immunological reaction, that would be a good thing to do. Part of that strategy, we revealed by the BioVex acquisition last year around this time in which an modified Herpes Simplex virus triggers an immune response that eliminates malignant melanoma. We're in Phase III in that. We'll be interested in looking at those data, which -- some of which should become available this year. And in addition, we look for opportunities to harness immune killing of tumors in other ways. Of course, I've been interested in Micromet and their BiTE platform for a very long time. We did sign the collaboration agreement with them in July of last year, and that in turn led to this most recent transaction. So it's been a very systematic and, I think, quite thoughtful look at opportunities to eliminate tumor cells in patients suffering from malignant disease.

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

I guess -- my questions, I guess, are for the team. And congrats given on your transformative seniority at Amgen, Roger. I'm sure you're going to mean this as well. That was getting me thinking about transitions. A lot of times in biotech there's a lot -- there's a change in management that's led to a big shift in company strategy. So I'm just wondering if you could give us some color on your view on how the teams are going to transition internally over the year, and how you're going to contribute communicate that with rhe Street?

I think that companies have different outcomes from transition. Some transitions come about because of dissatisfaction with company performance or some external shock. And in those cases, large changes in strategy and direction are perhaps completely appropriate. Second, the reason that you transition leadership is to get new ideas and new energy. And so you'd expect over time to have changes happen. Otherwise, you wouldn't make the transition. But I think in our case, Bob and I have worked together very, very closely. Amgen's mission will remain the same. Our dedication to innovation will remain the same. Our multi-modality platforms will remain the same. But there are lots of rooms in that. And our dedication to being a global company will remain the same. So I think that, that foundation you can count on. Bob, when he takes the job, will have a chance to explain sort of how he wants to take the company and time will tell there. In terms of the transition here, I said in the press release that announced the transition that we sought a seamless transition. And in effect, this is a generational change of leadership. And that's exactly what's happening. I think that this is the smoothest transition I have ever seen, and I have been through board service, as well as Amgen involved in quite a number of them. So I feel really good about that and the company is in a good place. And it feels good all around having Tony join us from outside brings energy and perspective from another company. Sean has long been in the on-deck circle for Roger and Bob sure as heck has earned his spurs here and having Jon come from Novartis and his background some time ago gives us the kind of outside perspective and expertise we need. So I think Amgen's in a good spot, and I think you'll be pleased with what you see going forward. And let me turn it over to Bob. If you got anything you'd like to add, Bob?

Robyn, obviously, I understand the interest in the question and we look forward to having the opportunity at the appropriate time to present the new team and for the new team to have a chance to talk to you about the things that we want to do strategically and the things that we're excited about at the company. But I think Kevin summarized very well our expectations for the transition.

I think that's a good question to close out today on. We appreciate your questions, and I look forward to talking to you again here in 3 months. Thank you very much.

Thanks for taking the time. If you have any other [ph] comments, questions, obviously, the Investor Relations team will be on the board for some time. Thanks again.

Ladies and gentlemen, this concludes Amgen's Fourth Quarter and Full Year 2011 Financial Results Conference Call. You may now disconnect.