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Amgen (AMGN - Analyst Report) reported fourth quarter 2012 earnings of $1.39 per share, 4 cents below the Zacks Consensus Estimate. Earnings, however, increased 16.8% from the year-ago period. Higher revenues and a lower share count contributed to the year-over-year increase in earnings.

Total revenue increased 11.0% to $4,421 million in the fourth quarter of 2012, comfortably surpassing the Zacks Consensus Estimate of $4,371 million. Key growth drivers included Enbrel, Xgeva, and Prolia.

Including one-time items, fourth quarter earnings declined 6% to $1.01 per share.

Full year earnings increased 22.6% to $6.45 per share, missing the Zacks Consensus Estimate of $6.49. Total revenues increased 11% to $17,265 million, surpassing the Zacks Consensus Estimate of $17,215 billion.

The Quarter in Detail

Fourth quarter total product revenues increased 11% to $4,337 million (US: $3,315 million, ex-US: $1,022 million).

Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp fell 9% to $489 million (US: $187 million; ex-US: $302 million) due to changes in practice patterns.

Revenues of Amgen’s other ESA, Epogen, decreased 1% to $479 million mainly due to a reduction in dose utilization that offset the impact of lower customer discounts and a favorable change in accounting estimates. Revenues declined 2% sequentially due to competition. We note that a new competitor, Affymax’ Omontys (peginesatide), has entered the dialysis market. On its fourth quarter call, Amgen said that the impact of competition continues to be modest and mainly in the form of pilot programs.

Worldwide revenues of Neulasta and Neupogen declined 1% to $1,306 million in the fourth quarter. Amgen is focusing on increasing investment in the US on direct-to-patient and caregiver communications in order to increase awareness about the risk of febrile neutropenia.

Enbrel delivered revenues of $1,161 million, up 23%. Higher average net sales price and increase in unit demand drove revenues. The company has been taking steps to improve Enbrel’s performance which includes optimization of the sales force, higher direct-to-consumer advertising and increased focus on appropriate access.

The company said that it has been increasing its share among bio-naïve (patients new to biologics) patients. With Amgen and Pfizer’s (PFE - Analyst Report) collaboration for Enbrel set to expire in late 2013, Amgen has completed the consolidation of US field sales activities under its wing. The consolidated sales force is targeting both the rheumatology and dermatology segments.

Fourth quarter 2012 Prolia revenues came in at $154 million, up from third quarter 2012 revenues of $110 million.

Meanwhile, Xgeva, which gained FDA approval in Nov 2010, delivered fourth quarter 2012 revenues of $215 million, up from the $201 million, $179 million, and $153 million reported in the last three quarters. Xgeva’s unit share in the US increased to 37% in the fourth quarter. However, with Novartis’ (NVS - Snapshot Report) Zometa slated to lose patent protection, there could some choppiness in the market with the entry of generic competition and reimbursement considerations.

Sensipar/Mimpara revenues increased 19% to $256 million in the reported quarter. Vectibix revenues came in at $91 million during the quarter, up 5%.

While fourth quarter 2012 R&D expenses increased 9% from the year-ago period, SG&A expenses increased 13%. Higher Enbrel profit share expenses and expansion in international markets led to the increase.

Amgen bought back 14 million shares during the reported quarter for $1.2 billion. Going forward, the company expects its share buyback activities to slow down with a higher focus on increasing dividend meaningfully.

Guides above Expectations

The company expects to earn $6.85 - $7.15 (up 5-10% from 2012) per share on total revenues of $17.8 billion - $18.2 billion (up 3-5% from 2012). Guidance was above expectations with the Zacks Consensus Estimate for earnings and revenues standing at $6.78 per share and $17.7 billion, respectively.

The company also provided an update on its 2015 guidance which had initially been provided in 2011. Amgen, which had forecasted 2015 earnings of $7.25 to $8.60 per share on revenues of $16 billion - $18 billion, now expects to reach the upper end of its revenue guidance in 2013 itself. Meanwhile, the company expects to achieve the earnings guidance in 2014.

During 2015, the company expects to achieve at least the upper end of its revenue guidance range and deliver earnings per share of at least $8.00.

Amgen currently carries a Zacks Rank #3 (Hold). We expect investor focus to remain on the company’s business review on Feb 7.

While both Pfizer and Novartis are Zacks Rank #3 stocks, Affymax is a Zacks Rank #2 stock (Buy).

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