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Biotech major, Amgen Inc. (AMGN - Free Report) reported third-quarter 2016 earnings of $3.02 per share, beating the Zacks Consensus Estimate of $2.79 by 8.24% and increasing 11% from the year-ago period.
Total revenues increased 2% to $5.81 billion in the third quarter of 2016, beating the Zacks Consensus Estimate of $5.74 billion by 1.2%.
Higher volumes of new products, including Prolia, Xgeva, Sensipar and Vectibix were partially offset by a softer performance by blockbuster drug Enbrel. Also, milestone payments, notably, a milestone received related to the approval of Kyprolis in Japan, pulled up the top line. Currency impact hurt sales by 1% in the quarter.
Quarter in Detail
Total product revenues were flat with the year-ago quarter at $5.12 billion (U.S.: $4.38 billion, down 1%; ex-U.S.: $1.13 billion, up 7% including Fx) as a strong performance of new products was offset by lower sales of established brands like Epogen, Neulasta and Neupogen and sluggish sales of Enbrel.
Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp grew 8% from the year-ago quarter to $531 million, reflecting higher unit demand in the U.S. given the shift in dialysis customer purchases from Epogen. Amgen does not expect much further transition to Aranesp going forward.
Revenues of Amgen’s other ESA, Epogen, declined 31% to $335 million, reflecting a shift in dialysis customer purchases to Aranesp as well as the impact of competition. Fresenius has moved about 80% of its patients to Mircera. Amgen does not expect Epogen biosimilars in the U.S. until late 2017.
While Neulasta revenues declined 5% to $1.2 billion from the year-ago period due to lower unit demand, Neupogen recorded a 36% decline in revenues ($183 million), reflecting biosimilar competition in the U.S. Zarxio, Sandoz’s (Novartis AG’s (NVS - Free Report) generic arm)biosimilar version of Neupogen, was launched in the U.S. in Sep 2015.
Meanwhile, Neulasta declined due to a small segment contraction in the U.S., and increased competition in the international business. The Neulasta Onpro kit (on-body injector) continues to perform well.
Enbrel delivered revenues of $1.45 billion, flat with the year-ago quarter, as higher net selling price was offset partially by volume decline due to increased competition and unfavorable changes in the inventory level. On the call, management mentioned that it expects minimal net price growth for Enbrel in 2017 that could hurt sales further. Moreover, further competition for Enbrel looms large. In August, Sandoz received FDA approval for its biosimilar version of Enbrel, called Erelzi. Notably, Erelzi is still to be launched in the U.S.
We remind investors that in September, Amgen’s biosimilar version of AbbVie Inc.’s (ABBV - Free Report) rheumatoid arthritis (RA) drug Humira received FDA approval under the trade name of Amjevita. This is Amgen’s first biosimilar to receive regulatory approval in the U.S. However, on the call, Amgen indicated that it is unlikely to launch Amjevita in 2017, due to the ongoing litigation with AbbVie.
Meanwhile Amgen’s biosimilar versions of Roche’s Rituxan (ABP 798), and Johnson and Johnson (JNJ - Free Report) /Merck’s Remicade (ABP 710) are in phase III development.
Prolia revenues came in at $379 million, up 18% from the year-ago quarter due to higher demand. Prolia volume growth continued to improve as the company continues to capture share across U.S. and EU. However, Prolia revenues declined 14% on a sequential basis due to typical seasonality.
Meanwhile, Xgeva delivered revenues of $394 million, up 4% from the year-ago quarter mainly due to higher demand.
Sensipar/Mimpara revenues increased 18% from the year-ago quarter to $415 million due to higher demand and price.
Vectibix revenues came in at $164 million, up 24% year over year driven by higher demand. Vectibix sales benefited from higher shipments to the Japanese partner Takeda. This can fluctuate throughout the year.
Kyprolis posted sales of $183 million, up 6.4% sequentially and 34% year over year reflecting higher demand. The company is seeing strong early uptake in the key markets in Europe where it is launched. Amgen is launching Kyprolis across Europe on a country-by-country basis as reimbursement is secured. However, in the U.S., Kyprolis lost some share in the third line plus market due to increased competition in the multiple myeloma market.
Blincyto sales increased 26% from the year-ago period to $29 million reflecting higher demand. Repatha revenues came in at $40 million, up from $27 million in the second quarter.
Margins Increase
R&D expenses declined 11% due to savings from transformation and process improvement efforts and lower costs required to support certain late-stage clinical programs, partially offset by higher upfront payments for several in-licensing transactions.
SG&A spend increased 1% due to higher investments to support new product launches, mainly in international markets.
Adjusted operating margins rose 420 basis points (bps) to 52.9% due to higher revenues and lower operating costs.
Amgen bought back shares worth $747 million during the quarter. In Oct 2016, the board of directors approved an increase in the share repurchase authorization to $5 billion.
Ups 2016 Guidance
Management raised the lower end of its revenue guidance, while raised the earnings range. The company now expects total revenue of $22.6 billion to $22.8 billion and earnings of $11.40 to $11.55 per share. Earlier, the company had guided total revenue of $22.5 billion to $22.8 billion and earnings of $11.10 to $11.40 per share. The Zacks Consensus Estimate for earnings and sales stand at $22.74 billion and $11.34 per share, respectively.
In the fourth quarter, operating expenses are expected to be higher than the third.
Our Take
Amgen continued to impress by surpassing expectations yet again and raising its profit outlook. Higher revenues and higher operating margins drove third-quarter results. However, shares declined 1.5% in after-market trading, possibly due to flat new product sales and softer performance of Enbrel.
While the company has some challenges in store given the presence of biosimilar competition and slowdown in mature products, contribution from new product launches should be meaningful. Meanwhile, the company’s restructuring plan should make it leaner and more cost-efficient.
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Amgen (AMGN) Q3 Earnings & Sales Top; Enbrel Hurts Stock
Biotech major, Amgen Inc. (AMGN - Free Report) reported third-quarter 2016 earnings of $3.02 per share, beating the Zacks Consensus Estimate of $2.79 by 8.24% and increasing 11% from the year-ago period.
Total revenues increased 2% to $5.81 billion in the third quarter of 2016, beating the Zacks Consensus Estimate of $5.74 billion by 1.2%.
Higher volumes of new products, including Prolia, Xgeva, Sensipar and Vectibix were partially offset by a softer performance by blockbuster drug Enbrel. Also, milestone payments, notably, a milestone received related to the approval of Kyprolis in Japan, pulled up the top line. Currency impact hurt sales by 1% in the quarter.
Quarter in Detail
Total product revenues were flat with the year-ago quarter at $5.12 billion (U.S.: $4.38 billion, down 1%; ex-U.S.: $1.13 billion, up 7% including Fx) as a strong performance of new products was offset by lower sales of established brands like Epogen, Neulasta and Neupogen and sluggish sales of Enbrel.
Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp grew 8% from the year-ago quarter to $531 million, reflecting higher unit demand in the U.S. given the shift in dialysis customer purchases from Epogen. Amgen does not expect much further transition to Aranesp going forward.
Revenues of Amgen’s other ESA, Epogen, declined 31% to $335 million, reflecting a shift in dialysis customer purchases to Aranesp as well as the impact of competition. Fresenius has moved about 80% of its patients to Mircera. Amgen does not expect Epogen biosimilars in the U.S. until late 2017.
While Neulasta revenues declined 5% to $1.2 billion from the year-ago period due to lower unit demand, Neupogen recorded a 36% decline in revenues ($183 million), reflecting biosimilar competition in the U.S. Zarxio, Sandoz’s (Novartis AG’s (NVS - Free Report) generic arm)biosimilar version of Neupogen, was launched in the U.S. in Sep 2015.
Meanwhile, Neulasta declined due to a small segment contraction in the U.S., and increased competition in the international business. The Neulasta Onpro kit (on-body injector) continues to perform well.
Enbrel delivered revenues of $1.45 billion, flat with the year-ago quarter, as higher net selling price was offset partially by volume decline due to increased competition and unfavorable changes in the inventory level. On the call, management mentioned that it expects minimal net price growth for Enbrel in 2017 that could hurt sales further. Moreover, further competition for Enbrel looms large. In August, Sandoz received FDA approval for its biosimilar version of Enbrel, called Erelzi. Notably, Erelzi is still to be launched in the U.S.
We remind investors that in September, Amgen’s biosimilar version of AbbVie Inc.’s (ABBV - Free Report) rheumatoid arthritis (RA) drug Humira received FDA approval under the trade name of Amjevita. This is Amgen’s first biosimilar to receive regulatory approval in the U.S. However, on the call, Amgen indicated that it is unlikely to launch Amjevita in 2017, due to the ongoing litigation with AbbVie.
Meanwhile Amgen’s biosimilar versions of Roche’s Rituxan (ABP 798), and Johnson and Johnson (JNJ - Free Report) /Merck’s Remicade (ABP 710) are in phase III development.
Prolia revenues came in at $379 million, up 18% from the year-ago quarter due to higher demand. Prolia volume growth continued to improve as the company continues to capture share across U.S. and EU. However, Prolia revenues declined 14% on a sequential basis due to typical seasonality.
Meanwhile, Xgeva delivered revenues of $394 million, up 4% from the year-ago quarter mainly due to higher demand.
Sensipar/Mimpara revenues increased 18% from the year-ago quarter to $415 million due to higher demand and price.
Vectibix revenues came in at $164 million, up 24% year over year driven by higher demand. Vectibix sales benefited from higher shipments to the Japanese partner Takeda. This can fluctuate throughout the year.
Kyprolis posted sales of $183 million, up 6.4% sequentially and 34% year over year reflecting higher demand. The company is seeing strong early uptake in the key markets in Europe where it is launched. Amgen is launching Kyprolis across Europe on a country-by-country basis as reimbursement is secured. However, in the U.S., Kyprolis lost some share in the third line plus market due to increased competition in the multiple myeloma market.
Blincyto sales increased 26% from the year-ago period to $29 million reflecting higher demand. Repatha revenues came in at $40 million, up from $27 million in the second quarter.
Margins Increase
R&D expenses declined 11% due to savings from transformation and process improvement efforts and lower costs required to support certain late-stage clinical programs, partially offset by higher upfront payments for several in-licensing transactions.
SG&A spend increased 1% due to higher investments to support new product launches, mainly in international markets.
Adjusted operating margins rose 420 basis points (bps) to 52.9% due to higher revenues and lower operating costs.
Amgen bought back shares worth $747 million during the quarter. In Oct 2016, the board of directors approved an increase in the share repurchase authorization to $5 billion.
Ups 2016 Guidance
Management raised the lower end of its revenue guidance, while raised the earnings range. The company now expects total revenue of $22.6 billion to $22.8 billion and earnings of $11.40 to $11.55 per share. Earlier, the company had guided total revenue of $22.5 billion to $22.8 billion and earnings of $11.10 to $11.40 per share. The Zacks Consensus Estimate for earnings and sales stand at $22.74 billion and $11.34 per share, respectively.
In the fourth quarter, operating expenses are expected to be higher than the third.
Our Take
Amgen continued to impress by surpassing expectations yet again and raising its profit outlook. Higher revenues and higher operating margins drove third-quarter results. However, shares declined 1.5% in after-market trading, possibly due to flat new product sales and softer performance of Enbrel.
While the company has some challenges in store given the presence of biosimilar competition and slowdown in mature products, contribution from new product launches should be meaningful. Meanwhile, the company’s restructuring plan should make it leaner and more cost-efficient.
AMGEN INC Price, Consensus and EPS Surprise
AMGEN INC Price, Consensus and EPS Surprise | AMGEN INC Quote
Amgen currently carries a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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