Amgen (AMGN - Analyst Report) reported fourth quarter earnings per share of $1.19, 5 cents below the Zacks Consensus Estimate. Earnings, however, increased 3.5% from the year-ago period. A lower tax rate, lower share count and higher revenues contributed to the year-over-year increase in earnings.
Total revenue increased 3% to $3,973 million in the fourth quarter of 2011. Revenues also missed the Zacks Consensus Estimate of $3,894 million.
Full year 2011 earnings came in at $5.26 per share, 2.7% above the year-ago period but 3 cents below the Zacks Consensus Estimate. Revenues increased 4% from the year-ago period to $15,582 million in 2011. Full year revenues were just above the Zacks Consensus Estimate of $15, 503 million.
The Quarter in Detail
Fourth quarter total product sales increased 4% to $3,907 million. US product revenues increased 5% during the quarter to $3,007 million. Meanwhile, international product revenues increased 1% to $900 million. Foreign exchange (Fx) fluctuation pulled down revenues by $28 million during the fourth quarter.
Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp fell 15% to $538 million (US: $223 million, down 22%; ex-US: $315 million, down 9%).
US sales were down mainly due to a decline in demand that was partially offset by a price increase. The decline reflected segment contraction due to changes in the product label and the reimbursement environment. International sales were affected by an overall decline in the segment and unfavorable currency fluctuation ($12 million).
Revenues of Amgen’s other ESA Epogen fell 18% to $486 million, reflecting a decline in demand. The decrease in demand was mainly due to lower dose utilization despite a growth in patient population. The decline reflected the impact of the implementation of the ESRD bundling strategy in 2011. Revenues were also impacted by label changes in June 2011 and reimbursement changes proposed by the Centers for Medicare & Medicaid Services.
Amgen, however, reported a sequential improvement in sales of 2%, reflecting dose stabilization.
Worldwide revenues of Neulasta and Neupogen grew 7% to $1,319 million in the fourth quarter. An increase in average net sales price and favorable changes in wholesaler inventories boosted US revenues to $1,021 million, up 12%. International revenues, however, fell 8% to $298 million. Sales were impacted by a decline in Neupogen units due to competition from biosimilars and unfavorable foreign currency fluctuations ($10 million).
Enbrel, which is facing increased competition in the dermatology market, posted revenues of $945 million, up 1%. A low single-digit percentage point unit growth was offset by unfavorable changes in wholesaler inventories. Enbrel’s competitors include Abbott Labs’ (ABT - Analyst Report) Humira, Merck/Johnson & Johnson’s (MRK - Analyst Report)/(JNJ - Analyst Report) Remicade and Johnson & Johnson’s Stelara among others.
Fourth quarter Prolia sales came in at $81 million, up from third quarter sales of $51 million and second quarter sales of $44 million. Amgen reported new as well as repeat patient growth. Amgen intends to launch DTC TV campaigns later this year which should drive sales further. Amgen is also looking to get Prolia approved for increasing bone mass in men with osteoporosis at high risk for fracture. A response from the FDA should be out by Sept. 20, 2012.
Meanwhile, Xgeva, which gained FDA approval on November 18, 2010, is off to a strong start with sales coming in at $134 million, up from the $100 million and $73 million reported in the third and second quarters of 2011, respectively. Sales were driven by overall segment growth and increased segment share. Xgeva gained EU approval on July 15, 2011. Amgen is currently seeking FDA approval for Xgeva for treating bone metastases in castrate-resistant prostate cancer patients – a response from the agency should be out by April 26, 2012. However, prior to that, the application will be reviewed by the Oncologic Drugs Advisory Committee (ODAC) on Feb. 8, 2012.
Sensipar/Mimpara revenues increased 15% to $216 million in the reported quarter. Global demand helped drive Vectibix revenues to $87 million during the quarter, up 10%.
While Amgen recorded a 2% increase in R&D expenses during the quarter, SG&A expenses increased 5%. Costs increased due to the impact of the US Healthcare Reform Excise Fee, Xgeva launch efforts, higher Enbrel profit share expenses, expansion of international operations and phase III clinical programs.
Amgen provided better-than-expected guidance for 2012. The company expects earnings in the range of $5.90 - $6.15 per share on revenues of $16.1 - $16.5 billion. The company intends to continue repurchasing shares in 2012 - Amgen currently has $5 billion remaining under its current share buyback program. The Zacks Consensus Estimate currently stands at $5.93 per share, towards the lower end of the guidance range provided by Amgen.
Micromet Acquisition Will Strengthen Oncology Portfolio
Besides announcing fourth quarter and full year 2011 results, Amgen announced its intention to acquire biotech company, Micromet, Inc. . The companies signed a definitive merger agreement under which Amgen will acquire Micromet for $11 per share in cash or approximately $1.16 billion. The deal has been approved by the Boards of both companies and is scheduled to close in the first quarter.
With this acquisition, Amgen is looking to expand its oncology portfolio. The company will not only gain access to Micromet’s pipeline, it will also acquire Micromet’s proprietary BiTE (Bispecific T cell Engager) antibody technology. The lead candidate at Micromet is blinatumomab, a BiTE antibody, currently in phase II development for acute lymphoblastic leukemia (ALL). The candidate is also being developed for the treatment of non-Hodgkin's lymphoma (NHL) and has the potential to be developed for other hematologic malignancies. Solitomab, another candidate in Micromet’s pipeline, is in phase I studies for patients with advanced solid tumors.
We currently have a Neutral recommendation on Amgen, which carries a Zacks #3 Rank (short-term Hold rating).