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Biotech major Amgen Inc. (AMGN - Free Report) reported first-quarter 2017 earnings of $3.15 per share, beating the Zacks Consensus Estimate of $3.00 by 5% and increasing 9% from the year-ago period. Higher operating margins offset a weak top-line performance to drive the bottom line.
Total revenue declined 1% to $5.46 billion in the first quarter of 2017, missing the Zacks Consensus Estimate of $5.68 billion by 3.8%. Excluding the impact of foreign exchange, sales were flat year over year.
While U.S. revenues declined 1%, ex-U.S. sales grew 3%, excluding currency headwinds.
Quarter in Detail
Total product revenue declined 1% from the year-ago quarter to $5.2 billion (U.S.: $4.10 billion; ex-U.S.: $1.10 billion) as strong demand for newer products like Prolia, Xgeva, and Blincyto was offset by lower sales of mature brands like Enbrel, Aranesp, Epogen, Neulasta and Neupogen.
Revenues of Amgen’s erythropoiesis-stimulating agent (ESA), Aranesp, declined 4% from the year-ago quarter to $511 million as higher unit demand in the U.S was offset by currency headwinds and lower inventory and selling price.
Revenues of the other ESA, Epogen, declined 10% to $270 million due to lower selling price.
Neulasta revenues rose 2% to $1.21 billion from the year-ago period as a favorable accounting benefit and higher price offset lower unit demand. Neupogen recorded a 31% decline in sales to $148 million due to 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 and is hurting sales.
The company expects Neulasta to face biosimilar competition in the U.S. from the fourth quarter of 2017. Neupogen is expected to face continued competitive pressure in 2017 from existing and potentially new biosimilars.
However, the Neulasta Onpro kit (on-body injector) continues to perform well commanding a market share of more than 50% in the U.S. for all Neulasta sales.
Enbrel delivered revenues of $1.18 billion, down 15% from the year-ago quarter due to increased competition and soft demand trends in the rheumatology/dermatology market. Enbrel’s market share in both rheumatology and the dermatology segments declined sequentially in the first quarter. Meanwhile, lower inventory levels also hurt Enbrel sales in the quarter.
On the call, management maintained that it expects minimal net price growth for Enbrel in 2017 while volume trends this year will be similar to 2016 levels.
Prolia revenues came in at $425 million, up 21% 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.
Meanwhile, Xgeva delivered revenues of $402 million, up 6% from the year-ago quarter mainly due to higher demand.
Sensipar/Mimpara revenues increased 15% to $421 million due to higher price and volume growth.
Vectibix revenues came in at $147 million, up 2%, driven by higher demand, which offset the negative impact of foreign currency.
Kyprolis posted sales of $190 million, up 23% year over year driven by higher demand.
Blincyto sales surged 26% from the year-ago period to $34 million, reflecting higher demand.
Amgen’s PCSK9 inhibitor, Repatha generated revenues of $49 million, lower than $58 million in the fourth quarter. At the call, management said that Repatha’s sequential performance was hurt by a booking of a Middle East tender in the previous quarter, which was not repeated in the first quarter of 2017.
Uptake of the drug, which gained FDA approval in Aug 2015, has not been very encouraging so far due to pricing and re-imbursement issues/payer restrictions. Sanofi (SNY - Free Report) and partner Regeneron Pharmaceuticals, Inc. (REGN - Free Report) also faced similar issues with their PCSK9 inhibitor Praluent.
We remind investors that a phase III cardiovascular outcomes study (FOURIER) on Repatha reported positive data in the first quarter of 2017.The outcomes data is considered the key to the commercial success of Repatha as it would broaden the use for the drug. Though data from the study looks good, it is not very clear if payers will be willing to improve access to Repatha based on this data.
Operating Margins Increase
Adjusted operating margins rose 300 basis points (bps) to 57.6% due to lower operating costs, reflecting continued benefits from transformation and process improvement efforts.
R&D expenses declined 13% in the quarter due to lower late-stage pipeline related costs, while SG&A spend declined 6% due to the Oct 2016 expiration of Enbrel residual royalty payments, which offset investments to support new product launches.
Amgen bought back shares worth $555 million in the quarter. At the end of the first quarter, Amgen had $3.5 billion remaining under its $5 billion stock repurchase plan.
2017 Guidance
While Amgen retained the previously issued sales outlook, it raised the earnings guidance to account for the first quarter earnings beat.
The company expects total revenue in the range of $22.3 billion to $23.1 billion, same as the previous guidance. However, adjusted earnings are now expected in the range of $12.00 to $12.60 in 2017 compared with $11.80 to $12.60 per share expected previously.
Meanwhile, operating margin is expected to be lower in the rest of the quarters this year due to the timing of expenses.
Our Take
It was a rather mixed quarter for Amgen as it beat earnings expectations while missing the same for sales. Shares lost 3.1% in after-market trading. However, so far this year, Amgen’s shares are up 8.7%, better than the 4.7% increase registered by the Zacks classified Biomed/Genetics industry.
Though Amgen’s newer products – Prolia, Xgeva, Vectibix, Nplate and Sensipar – are all performing well, investors are concerned that their volume growth may not be enough to offset the decline in mature brands like Enbrel. Meanwhile, Neulasta and Epogen could start facing biosimilar competition this year while minimal sales price increases. Stiff competition is beginning to hurt sales of Enbrel. However, Amgen’s restructuring plan should make it leaner and more cost efficient. Amgen is also progressing with its pipeline given quite a few regulatory and data updates scheduled for the coming quarters
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Amgen (AMGN) Q1 Earnings Top, Sales Miss, Shares Decline
Biotech major Amgen Inc. (AMGN - Free Report) reported first-quarter 2017 earnings of $3.15 per share, beating the Zacks Consensus Estimate of $3.00 by 5% and increasing 9% from the year-ago period. Higher operating margins offset a weak top-line performance to drive the bottom line.
Total revenue declined 1% to $5.46 billion in the first quarter of 2017, missing the Zacks Consensus Estimate of $5.68 billion by 3.8%. Excluding the impact of foreign exchange, sales were flat year over year.
While U.S. revenues declined 1%, ex-U.S. sales grew 3%, excluding currency headwinds.
Quarter in Detail
Total product revenue declined 1% from the year-ago quarter to $5.2 billion (U.S.: $4.10 billion; ex-U.S.: $1.10 billion) as strong demand for newer products like Prolia, Xgeva, and Blincyto was offset by lower sales of mature brands like Enbrel, Aranesp, Epogen, Neulasta and Neupogen.
Revenues of Amgen’s erythropoiesis-stimulating agent (ESA), Aranesp, declined 4% from the year-ago quarter to $511 million as higher unit demand in the U.S was offset by currency headwinds and lower inventory and selling price.
Revenues of the other ESA, Epogen, declined 10% to $270 million due to lower selling price.
Neulasta revenues rose 2% to $1.21 billion from the year-ago period as a favorable accounting benefit and higher price offset lower unit demand. Neupogen recorded a 31% decline in sales to $148 million due to 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 and is hurting sales.
The company expects Neulasta to face biosimilar competition in the U.S. from the fourth quarter of 2017. Neupogen is expected to face continued competitive pressure in 2017 from existing and potentially new biosimilars.
However, the Neulasta Onpro kit (on-body injector) continues to perform well commanding a market share of more than 50% in the U.S. for all Neulasta sales.
Enbrel delivered revenues of $1.18 billion, down 15% from the year-ago quarter due to increased competition and soft demand trends in the rheumatology/dermatology market. Enbrel’s market share in both rheumatology and the dermatology segments declined sequentially in the first quarter. Meanwhile, lower inventory levels also hurt Enbrel sales in the quarter.
On the call, management maintained that it expects minimal net price growth for Enbrel in 2017 while volume trends this year will be similar to 2016 levels.
Prolia revenues came in at $425 million, up 21% 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.
Meanwhile, Xgeva delivered revenues of $402 million, up 6% from the year-ago quarter mainly due to higher demand.
Sensipar/Mimpara revenues increased 15% to $421 million due to higher price and volume growth.
Vectibix revenues came in at $147 million, up 2%, driven by higher demand, which offset the negative impact of foreign currency.
Kyprolis posted sales of $190 million, up 23% year over year driven by higher demand.
Blincyto sales surged 26% from the year-ago period to $34 million, reflecting higher demand.
Amgen’s PCSK9 inhibitor, Repatha generated revenues of $49 million, lower than $58 million in the fourth quarter. At the call, management said that Repatha’s sequential performance was hurt by a booking of a Middle East tender in the previous quarter, which was not repeated in the first quarter of 2017.
Uptake of the drug, which gained FDA approval in Aug 2015, has not been very encouraging so far due to pricing and re-imbursement issues/payer restrictions. Sanofi (SNY - Free Report) and partner Regeneron Pharmaceuticals, Inc. (REGN - Free Report) also faced similar issues with their PCSK9 inhibitor Praluent.
We remind investors that a phase III cardiovascular outcomes study (FOURIER) on Repatha reported positive data in the first quarter of 2017.The outcomes data is considered the key to the commercial success of Repatha as it would broaden the use for the drug. Though data from the study looks good, it is not very clear if payers will be willing to improve access to Repatha based on this data.
Operating Margins Increase
Adjusted operating margins rose 300 basis points (bps) to 57.6% due to lower operating costs, reflecting continued benefits from transformation and process improvement efforts.
R&D expenses declined 13% in the quarter due to lower late-stage pipeline related costs, while SG&A spend declined 6% due to the Oct 2016 expiration of Enbrel residual royalty payments, which offset investments to support new product launches.
Amgen bought back shares worth $555 million in the quarter. At the end of the first quarter, Amgen had $3.5 billion remaining under its $5 billion stock repurchase plan.
2017 Guidance
While Amgen retained the previously issued sales outlook, it raised the earnings guidance to account for the first quarter earnings beat.
The company expects total revenue in the range of $22.3 billion to $23.1 billion, same as the previous guidance. However, adjusted earnings are now expected in the range of $12.00 to $12.60 in 2017 compared with $11.80 to $12.60 per share expected previously.
Meanwhile, operating margin is expected to be lower in the rest of the quarters this year due to the timing of expenses.
Our Take
It was a rather mixed quarter for Amgen as it beat earnings expectations while missing the same for sales. Shares lost 3.1% in after-market trading. However, so far this year, Amgen’s shares are up 8.7%, better than the 4.7% increase registered by the Zacks classified Biomed/Genetics industry.
Though Amgen’s newer products – Prolia, Xgeva, Vectibix, Nplate and Sensipar – are all performing well, investors are concerned that their volume growth may not be enough to offset the decline in mature brands like Enbrel. Meanwhile, Neulasta and Epogen could start facing biosimilar competition this year while minimal sales price increases. Stiff competition is beginning to hurt sales of Enbrel. However, Amgen’s restructuring plan should make it leaner and more cost efficient. Amgen is also progressing with its pipeline given quite a few regulatory and data updates scheduled for the coming quarters
Amgen currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Amgen Inc. Price, Consensus and EPS Surprise
Amgen Inc. Price, Consensus and EPS Surprise | Amgen Inc. Quote
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>