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Amgen (AMGN) Down 5.5% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Amgen (AMGN - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amgen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Amgen Beats on Q4 Earnings & Sales

Amgen reported fourth-quarter 2020 earnings of $3.81 per share, which beat the Zacks Consensus Estimate of $3.36. Earnings rose 5% year over year driven by higher revenues, which offset the impact of higher operating expenses.

Total revenues of $6.63 billion beat the Zacks Consensus Estimate of $6.57 billion. Total revenues rose 7% year over year.

Quarter in Detail

Total product revenues rose 8% from the year-ago quarter to $6.3 billion (U.S.: $4.66 billion; ex-U.S.: $1.67 billion). Higher sales of Repatha, Otezla and biosimilar products were offset by the erosion of mature brands from biosimilar/new competition and COVID-19 related impact on some drugs. The company said that though it experienced continued recovery from the peak impact of the COVID-19 pandemic as physician interaction and prescription trends improved, it was still below pre-COVID-19 levels.

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

Other revenues of $300 million declined 5% year over year.

Performance of Key Drugs

Prolia revenues came in at $749 million, flat from the year-ago quarter. COVID-19 has caused a change in historical quarterly trends for Prolia. The drug witnesses higher revenues in the second and the fourth quarters of a year due to its six-month dosing regimen. Given the negative impact of the pandemic in the second quarter and the six-month dosing regimen of Prolia, the number of repeat patients in the fourth quarter were lower than pre-COVID growth trends. However, the company did witness a positive trend in new patient starts.

Xgeva delivered revenues of $502 million, up 3% from the year-ago quarter driven by volume growth as sales of the drug continued to recover from the COVID-19 impact.

Kyprolis recorded sales of $272 million, up 2% year over year driven by new patient share helped by encouraging uptake for combination use of Kyprolis plus Darzalex and dexamethasone (based on CADOR study data).

Repatha generated revenues of $253 million, up 27% 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.

Vectibix revenues came in at $221 million, up 21% year over year. Nplate sales rose 8% to $227 million. Blincyto sales increased 29% from the year-ago period to $103 million.

Parsabiv recorded sales of $172 million, down 4% due to changes in reimbursement rules for the drug. In 2021, Parsabiv sales are expected to decline approximately 40% to 50%. Parsabiv sales in the first quarter are expected to be the lowest of the year as customers deplete inventory build in the second half of 2020.

Aimovig recorded sales of $104 million in the quarter, up only 6% year over year as volume growth was partially offset by lower net selling price. COVID-19 hurt new patient starts of the drug, which led to flat sequential numbers. Aimovig commands 46% share of total prescription of the CGRP class of medicines and 38% of new prescriptions.

New osteoporosis drug, Evenity recorded sales of $90 million in the quarter compared with $59 million in the previous quarter driven by volume growth. Strong volume growth is expected to continue in 2021.

Sales of Otezla were $617 million in the quarter driven by U.S. prescription volume growth.

Biosimilar generated revenues of $541 million in the quarter driven by volume growth, which offset the impact of declines in net selling price. Sales of Kanjinti and Mvasi were $158 million and $280 million in the quarter, compared with $167 million and $231 million, respectively, in the previous quarter. Sales of Kanjinti declined sequentially as volume gains were offset by price declines and unfavorable changes to estimated sales deductions. Sales of Amgevita rose 45% to $103 million.

In 2021, market expansion and volume growth are expected to benefit Mvasi’s sales while lower prices due to increased competition may hurt sales. Kanjinti sequential sales trends in 2021 are expected to be similar to the fourth quarter. Overall, for biosimilars, volume growth is expected to be partially offset by lower prices due to increased competition in 2021.

However, all the mature drugs like Enbrel, Aranesp, Epogen, Neupogen and Neulasta declined due to an array of branded and generic competitors. Enbrel revenues of $1.27 billion declined 5% year over year due to lower demand and market share as well as slower growth pace in the rheumatoid arthritis market related to COVID-19.

Aranesp revenues declined 12% from the prior-year quarter to $375 million. Revenues of the other ESA, Epogen, declined 37% to $133 million. Neulasta revenues declined 19% from the year-ago period to $536 million. Neupogen recorded 26% increase in sales to $46 million in the quarter. Sensipar/Mimpara revenues declined 58% to $45 million.

Other product sales declined 13% to $76 million.

Operating Margins Decline

Adjusted operating margin declined 150 basis points (bps) to 43.1%. Adjusted operating expenses rose 9% year over year in the quarter to $3.91 billion.

SG&A spend rose 17% to $1.76 billion due to Otezla and new products related commercial expenses. R&D expenses declined 8% year over year to $1.18 billion driven by lower spend on early-stage pipeline and cost recoveries from BeiGene collaboration.

Adjusted tax rate was 15.4% for the quarter, a 0.5 point increase from the year-ago quarter.

Amgen repurchased 5.3 million shares worth $1.2 billion in the quarter and has $3.0 billion remaining under its stock repurchase authorization.

2020 Results

Full-year 2020 sales rose 9% to $25.4 billion, in line with the Zacks Consensus Estimate and within the guided range of to $25.1 billion-$25.5 billion.

Adjusted earnings for 2020 were $16.60 per share, which beat the Zacks Consensus Estimate of $16.13 and came ahead of the guided range of $15.80 to $16.15. Earnings rose 12% year over year.

2021 Guidance

Amgen guided revenues in the range of $25.8 billion-$26.6 billion. Adjusted earnings per share are expected in the range of $16.00 to $17.00 per share.

Total other revenue in 2021 is expected to be in the range of $1.4 billion - $1.5 billion, to be boosted by revenues under a collaboration with Eli Lilly for the manufacture of COVID-19 antibodies, which would begin to be recorded from the second quarter.

Adjusted operating costs are expected to grow at a rate similar of 7% recorded in 2020 as the company invests in innovation, launches of new products and digitization efforts. Operating margin is expected to be roughly 50% in 2021. Adjusted tax rate is expected in the range of 13% to 14%. Amgen expects net selling prices for its drugs to decline in the mid-single digit range in 2021.

Amgen plans to spend approximately $900 million for capital expenditures in 2021. The company expects to buy back shares in the range of $3 billion to $4 billion through the year.

In 2021, Amgen expects volume growth from Prolia, Otezla Repatha, Evenity, Aimovig, and its biosimilars portfolio to be partially offset by biosimilar/generic competition for mature drugs and accelerating erosion in U.S. Parsabiv sales. In 2021, Amgen also expects increasing competition for its biosimilar drugs. Additionally, the company expects continued impact from COVID-19 with quarter-to-quarter variability in earnings and revenues. A recovery is expected in the latter part of the year depending on how the vaccine rollouts work out.

Q1 Outlook

Historically, the first quarter of 2021 represents the lowest product sales quarter of the year as U.S. patients work through deductibles, especially for products, including Enbrel, Otezla and Aimovig.

The first quarter of 2020 had benefited from roughly $100 million in inventory build due to COVID-19, which will not be repeated in the first quarter of 2021. Similarly, in the first quarter of 2020, Enbrel benefited from approximately $115 of favorable changes to estimated sales deductions, which will not reflect in the results of the first quarter of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.86% due to these changes.

VGM Scores

At this time, Amgen has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Amgen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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