Amgen Beats Forecasts on Higher Revenue, Margins

Revenue grew 2% Y-o-Y to $5.8 billion versus $5.72 billion in the year-ago period

a1Biotech giant Amgen Inc. (NASDAQ: AMGN) announced its Q3 FY16 financial results on October 27th, 2016.

The Thousand Oaks, California-based company discovers, develops, manufactures and delivers human therapeutics and operates under a single business segment – human therapeutics. The Company’s marketed products portfolio includes Neulasta (pegfilgrastim); erythropoiesis-stimulating agents (ESAs), such as Aranesp (darbepoetin alfa) and EPOGEN (epoetin alfa); Sensipar/Mimpara (cinacalcet); XGEVA (denosumab); Prolia (denosumab); NEUPOGEN (filgrastim), and other marketed products, such as Vectibix (panitumumab), Nplate (romiplostim) and Corlanor (ivabradine). The Company focuses its R&D on human therapeutics for the treatment of serious illness in the areas of oncology/hematology, cardiovascular disease, inflammation, bone health, nephrology and neuroscience. Read more about Amgen’s financial results below.

Q3 FY16 financial highlights

During Q3 FY16, Amgen’s revenues grew 2% Y-o-Y to $5.8 billion versus $5.72 billion in the year-ago period on the back of strong unit volume growth from Sensipar (cinacalcet), Prolia (denosumab), Vectibix (panitumumab), XGEVA (denosumab) and Nplate (romiplostim).

Source: Amgen
Source: Amgen

Amgen’s cost of sales margin improved by 0.1% driven by manufacturing efficiencies and higher net selling price, offset partially by product mix. R&D expenses fell 12% due to lower spending required to support certain later-stage clinical programs and transformation and process improvement efforts. Selling, general & administrative expenses were flat during the reporting quarter. Total operating expenses fell 3%, with all expense categories reflecting savings from our transformation and process improvement efforts.

As a result, GAAP operating income grew 8% to $2.52 billion and GAAP operating margin improved by 3.4% to 45.8%. Consequently, GAAP net income jumped 8% to $2.01 billion, or $2.68 per share, compared to $1.86 billion, or $2.44 per share, in the year-ago period. On a non-GAAP basis, operating income jumped 9% to $2.91 billion and non-GAAP operating margin improved by 4.2% to 52.9%. Non-GAAP EPS grew 11% to $3.02 driven by higher revenues and operating margins.

Product sales highlights

a3During Q3 FY16, total product sales were flat at $5.51 billion versus the year-ago period.

Enbrel (etanercept) sales were flat at $1.45 billion versus the year-ago period, as higher net selling price was offset by the impact of competition and unfavorable changes in inventory levels. The U.S. accounted for $1.38 billion of sales, with rest of the world (ROW) accounting for $64 million.

Neulasta (pegfilgrastim) sales fell 5% Y-o-Y to $1.2 billion versus $1.26 billion in the year-ago period, driven by lower unit demand. The U.S. accounted for $1.02 billion of sales, with ROW accounting for $176 million.

Aranesp (darbepoetin alfa) sales grew 8% Y-o-Y to $531 million versus $493 million in the year-ago period, driven mainly by higher unit demand due to a shift by some U.S. dialysis customers from EPOGEN (epoetin alfa) to Aranesp. The U.S. accounted for $275 million of sales, with ROW accounting for $256 million.

Sensipar/Mimpara sales jumped 18% Y-o-Y to $415 million versus $353 million in the year-ago period, driven by net selling price and higher unit demand. The U.S. accounted for $329 million of sales, with ROW accounting for $86 million.

XGEVA sales grew 4% Y-o-Y to $394 million versus $378 million in the year-ago period, driven by higher unit demand. The U.S. accounted for $296 million of sales, with ROW accounting for $98 million.

Prolia sales soared 18% Y-o-Y to $379 million versus $320 million in the year-ago period, driven by higher unit demand. The U.S. accounted for $249 million of sales, with ROW accounting for $130 million.

EPOGEN sales plunged 31% Y-o-Y to $335 million versus $489 million in the year-ago period, due to the impact of competition, abnormally high purchases by a large end customer in the year ago period and a shift by some U.S. dialysis customers to Aranesp. The U.S. accounted for the entire sales generated.

KYPROLIS (carfilzomib) sales jumped 34% Y-o-Y to $183 million versus $137 million in the year-ago period, driven by higher unit demand. The U.S. accounted for $140 million of sales, with ROW accounting for $43 million.

Other highlights

Cash flow: During Q3 FY16, Amgen generated $2.5 billion of free cash flow compared to $2.8 billion in the year-ago period. Amgen’s cash and investments totaled $38 billion at the end of the reporting quarter, up from $31.1 billion in the same period last year.

a4Share buyback and dividend: Amgen’s board of directors declared a dividend of $1.00 per share on October 14th, 2016, that will be paid on December 8th, 2016, to all stockholders of record as of November 16th, 2016. During the reporting quarter, Amgen repurchased 4.4 million shares of common stock for $747 million. In October 2016, the board of directors approved an increase in the remaining share repurchase authorization for an aggregate authorization of $5 billion.

a5Major pipeline updates: In August 2016, the FDA approved BLINCYTO for the treatment of pediatric patients with Philadelphia chromosome negative relapsed or B-cell precursor acute lymphoblastic leukemia.

In September 2016, the FDA approved AMJEVITA across all eligible indications of the reference product, HUMIRA (adalimumab), including treatment of psoriatic arthritis, ankylosing spondylitis and moderate-to-severe rheumatoid arthritis, polyarticular juvenile idiopathic arthritis (patients 4 years of age or older), chronic plaque psoriasis, adult Crohn’s disease and ulcerative colitis. AMJEVITA is the Company’s first biosimilar to receive regulatory approval in the U.S.

In August 2016, the FDA issued a Complete Response Letter for the New Drug Application for Parsabiv for the treatment of secondary hyperparathyroidism (sHPT) in adult patients with chronic kidney disease (CKD) on hemodialysis. In September 2016, the Committee for Medicinal Products for Human Use of the European Medicines Agency adopted a positive opinion for the Marketing Authorization of Parsabiv, recommending approval for the treatment of sHPT in adult patients with CKD on hemodialysis.

Guidance for full year FY16

For the full year FY16, Amgen has revised upwards its forecasts for revenues and earnings. It now expects revenues in the range of $22.6 billion to $22.8 billion versus the earlier estimates of $22.5 billion to $22.8 billion. On a GAAP basis, EPS is forecasted in the range of $9.94 to $10.11 and a tax rate in the range of 16.5% to 17.5%. Previously, the Company expected GAAP EPS in the range of $9.55 to $9.90. Tax rate guidance is unchanged. Capital expenditures for the year are expected to be approximately $700 million.

Stock Performance

a6Amgen’s stock stood at $146.42, falling 1.76%, at the close on Monday, November 14th, 2016, having vacillated between an intraday high of $149.15 and a low of $146.01 during the session. The stock’s trading volume was at 5,059,376 for the day. The Company’s market cap was at $109.38 billion as of Monday’s close.

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