Back to top

Image: Bigstock

Amgen (AMGN) Stock Moves Lower Despite Q2 Earnings Beat

Read MoreHide Full Article

Amgen (AMGN - Free Report) reported second-quarter 2020 earnings of $4.25 per share, which beat the Zacks Consensus Estimate of $3.81. Earnings rose 7% year over year.

Total revenues of $6.21 billion beat the Zacks Consensus Estimate of $6.18 billion. Total revenues rose 6% year over year.

Quarter in Detail

Total product revenues rose 6% from the year-ago quarter to $5.91 billion (U.S.: $4.43 billion; ex-U.S.: $1.48 billion). Higher sales of Otezla, Repatha and biosimilar products were offset by lower sales of several other drugs like Prolia, Xgeva, Kyprolis and others due to COVID-19 and the erosion of mature brands from biosimilar/new competition. Business disruption due to decline in visits of patients to doctors’ clinics amid the coronavirus pandemic hurt sales of some of its products.

Product sales growth was mostly driven by higher volumes (up 13%) as prices were lower for several drugs.

Other revenues of $298 million were almost flat year over year.

Performance of Key Drugs

Prolia revenues came in at $659 million, down 6% from the year-ago quarter. Volumes of the drug declined due to fewer office visits by osteoporosis patients who are generally older and more vulnerable to COVID-19 and require in-office administration.

Xgeva delivered revenues of $435 million, down 13% from the year-ago quarter due to disruptions in physician-patient interactions amid COVID-19 pandemic. Moreover, in response to pandemic, the National Comprehensive Cancer Network (NCCN) revised its treatment guidelines to prioritize primary cancer treatments over bone targeting agents like Xgeva. This also hurt sales of Xgeva in the second quarter.

Kyprolis recorded sales of $253 million, down 5% year over year, hurt by lower volumes due to reduced multiple myeloma patient visits to doctors.

Repatha generated revenues of $200 million, up 32% year over year, as higher volume was partially offset by lower prices due to Amgen’s efforts to improve access and affordability for the product. However, Repatha’s new prescription trends in the United States were negatively impacted by COVID-19 in April but improved later in the quarter.

Vectibix revenues came in at $195 million, down 1% year over year. Nplate sales declined 4% to $193 million due to fewer patient visits to doctors and subsequent loss of new patient starts to oral alternatives. Blincyto sales increased 19% from the year-ago period to $93 million driven by higher demand.

Parsabiv recorded sales of $186 million, up 11% driven by higher demand, which offset the impact of lower selling prices.

New migraine medicine, Aimovig recorded sales of $98 million in the quarter, higher than $71 million in the previous quarter as higher volumes offset the impact of lower price as Amgen expanded patient access.

New osteoporosis drug, Evenity recorded sales of $101 million in the quarter compared with $100 million in the previous quarter. In the United States, sales were $40 million while international sales were $61 million. Sales were hurt by slower new patient starts in the United States.

Sales of Otezla were $561 million in the quarter, up 23% year over year driven by volume growth. Please note that Otezla was purchased by Amgen from Celgene in November 2019 as the latter had to divest the drug in order to complete its merger with Bristol-Myers (BMY - Free Report) .

Biosimilar generated revenues of $357 million in the quarter. Among biosimilars, Amjevita (biosimilar of AbbVie’s [(ABBV - Free Report) ] Humira) sales were $62 million in the quarter. Sales of Kanjinti (Amgen’s biosimilar of Roche’s [(RHHBY - Free Report) ] Herceptin) and Mvasi (biosimilar of Roche’s Avastin) were $123 million and $172 million in the quarter, compared with $119 million and $115 million, respectively, in the previous quarter. Kanjinti and Mvasi biosimilars were launched by Amgen in the United States in July last year.

However, Amgen’s mature drugs like Enbrel, Aranesp, Epogen, Neupogen and Neulasta declined due to an array of branded and generic competitors.

Aranesp revenues declined 11% from the prior-year quarter to $387 million due to lower net selling price and demand trends due to increased competitive pressures.

Revenues of the other ESA, Epogen, declined 28% to $161 million due to lower demand and selling prices.

Neulasta revenues declined 28% from the year-ago period to $593 million due to the impact of biosimilar competition on demand and price.

Neupogen recorded 35% decline in sales to $49 million in the quarter. Enbrel delivered revenues of $1.25 billion, down 9% year over year due to lower demand and market share as well as slower growth pace in the rheumatoid arthritis market.

Sensipar/Mimpara revenues declined 34% to $81 million due to several at-risk generic launches.

Other product sales declined 24% to $60 million.

Operating Margins Increase

Adjusted operating margin rose 170 basis points (bps) to 55.0%. Adjusted operating expenses rose 2% year over year in the quarter to $2.96 billion.

SG&A spend rose 1% to $1.27 billion as Otezla-related commercial expenses offset other lower expenses due to COVID-19. R&D expenses rose 3% year over year to $936 million as higher spending on Amgen’s oncology pipeline and costs related to Otezla were partially offset by cost recoveries from Amgen’s collaboration with China’s leading pharma company, BeiGene.

2020 Guidance

Amgen expects revenues in the range of $25.0 billion-$25.6 billion, re-affirmed from prior expectations.

Adjusted earnings per share guidance was raised from a range of $14.85-$15.60 to $15.10 to $15.75 per share.

Adjusted operating costs are expected to grow in a high single-digit percentage range year over year in 2020. In fact, operating expenses are expected to meaningfully increase in the second half of the year. Adjusted tax rate is expected in the range of 13.5% to 14.5%.

Amgen plans to spend approximately $600 million for capital expenditures in 2020. The company guided that it will buy back shares at the lower end of the previous guidance of $3 billion to $5 billion through the year.

Our Take

Amgen’s second-quarter results were strong, as it beat estimates for both earnings and sales. Amgen re-affirmed its previously issued sales guidance for 2020 while raising its earnings range. Shares were down 1.5% in after-hours trading on Tuesday. Amgen’s stock has risen 5.9% this year so far against an increase of 7.4% for the industry.

 

 

Due to COVID-19 pandemic, interruptions to physician-patient interactions led to delays in diagnosis and treatment of several of Amgen’s drugs. However, management said that the negative impact from COVID-19 was more pronounced early in the second quarter and improved in the second half of the quarter. Nonetheless, Amgen expects fluctuations in quarterly revenues and earnings as long as the pandemic continues due to uncertainty around the timing of the recovery.

Amgen currently has 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. price-consensus-eps-surprise-chart | Amgen Inc. Quote

 

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained an impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Roche Holding AG (RHHBY) - free report >>

Bristol Myers Squibb Company (BMY) - free report >>

Amgen Inc. (AMGN) - free report >>

AbbVie Inc. (ABBV) - free report >>

Published in