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Amgen (AMGN) Up 2.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Amgen (AMGN - Free Report) . Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Amgen due for a pullback? 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.
Beats on Q3 Earnings, Lags Sales, Ups View
Amgen reported third-quarter 2023 adjusted earnings of $4.96 per share, which beat the Zacks Consensus Estimate of $4.65. Earnings rose 6% year over year due to higher revenues, which were partially offset by higher operating costs.
Total revenues of $6.90 billion missed the Zacks Consensus Estimate of $6.96 billion. Total revenues rose 4% year over year, driven by higher product sales.
Total product revenues increased 5% from the year-ago quarter to $6.55 billion (U.S.: $4.69 billion; ex-U.S.: $1.86 billion). Higher volumes were partially offset by lower selling prices of several drugs. Volumes rose 11% in the quarter, partially offset by a 3% lower net selling price and 3% unfavorable changes to estimated sales deductions.
Other revenues were $355 million in the quarter, down 14.5% year over year due to lower revenues from its COVID-19 manufacturing collaboration.
The company witnessed robust volume growth across all its three therapeutic areas, general medicine, inflammation and hematology-oncology portfolios.
Performance of Key Drugs
General Medicine
Prolia revenues came in at $986 million, up 14% from the year-ago quarter, driven by volume growth and higher net selling prices. Prolia sales beat the Zacks Consensus Estimate of $983 million but missed our model estimate of $992 million. Prolia volumes are expected to continue to grow.
Evenity recorded sales of $307 million in the quarter, up 53% year over year, driven by volume growth in and outside the United States. Evenity sales beat the Zacks Consensus Estimate of $284 million as well as our model estimate of $289 million.
Repatha generated revenues of $406 million, up 31% year over year, as higher volume was partially offset by lower prices due to new formulary coverage by CVS in July for commercial patients. The volume growth was backed by a record number of new patients starting treatment. Repatha sales marginally missed the Zacks Consensus Estimate of $407 million but beat our model estimate of $400 million.
Aimovig recorded sales of $94 million in the quarter, down 12% year over year due to lower net selling price.
Hematology-Oncology
Xgeva delivered revenues of $519 million, up 5% year over year, driven by higher net selling prices. Xgeva sales missed the Zacks Consensus Estimate and our model estimate of $522 million and $527 million, respectively.
Kyprolis recorded sales of $349 million, up 10% year over year, driven by volume growth.
Vectibix revenues came in at $252 million, up 2% year over year, driven by volume growth and higher selling price, which were partially offset by unfavorable foreign exchange impact.
Nplate sales rose 45% to $419 million, driven by volume growth, driven by a $142 million order from the U.S. government. Amgen expects to fulfill another $62 million order from the U.S. government in the fourth quarter.
Blincyto sales increased 55% from the year-ago period to $220 million, also driven by volume growth as the drug benefited from broad prescribing for patients with B-cell precursor ALL and updated NCCN guidelines that were issued in May.
Lumakras/Lumykras recorded sales of $52 million in the quarter, down 31% from the year-ago period, due to unfavorable changes to estimated sales deductions related to ongoing reimbursement negotiations in France. Lumakras/Lumykras sales missed the Zacks Consensus Estimate of $87 million as well as our model estimate of $95 million.
In oncology biosimilars, sales of Kanjinti (Amgen’s biosimilar of Roche’s Herceptin) were $20 million, down 72% year over year due to lower pricing and volumes as a result of increased competition.
Sales of Mvasi (biosimilar of Roche’s Avastin) were $213 million in the quarter, up 2% year over year, driven by volume growth and favorable changes to estimated sales deductions, which were partially offset by lower pricing.
Inflammation
Sales of Otezla were $567 million in the quarter, down 10%, due to lower pricing, unfavorable changes to estimated sales deductions and lower inventory levels. Otezla sales in the United States continue to be hurt by free drug programs launched by new competitors. In the United States, Otezla sales price declined due to higher rebates to support expanded access for commercial and Medicare Part D patients. Otezla sales missed the Zacks Consensus Estimate of $635 as well as our estimate of $620 million.
On the conference call, Amgen said it is seeing a reduced impact of the free drug programs. Amgen is also making investments to educate physicians about the benefits of Otezla for appropriate patients and has increased the Otezla sales force by 20%. Amgen expects these initiatives to drive Otezla’s return to growth.
Enbrel revenues of $1.04 billion declined 6% year over year due to unfavorable changes to estimated sales deductions, which offset the impact of slightly improved volumes. Enbrel sales beat the Zacks Consensus Estimate and our estimate, both of which stood at $1.02 billion. Similar to the second quarter, improved payer coverage led to increase in new patients, which, in turn, led to some better volume growth in the third quarter. Amgen expects improved coverage to continue to lead to new patient growth and thus support volumes. However, prices are expected to continue to decline.
Newly approved asthma drug, Tezspire (tezepelumab) recorded sales of $161 million in the quarter, up 21% sequentially, driven by volume growth. Tezspire volumes benefited from the launch of a self-administered, pre-filled, single-use pen formulation of the drug in the first quarter, improving patient convenience and accessibility and also more flexibility in treatment options.
Amgevita sales were $152 million in the quarter, up 30% year over year, driven by 53% volume growth, partially offset by lower inventory levels and net selling price.
New drug Tavneos generated $37 million in sales in the third quarter compared with $30 million in the previous quarter. The drug’s 23% sequential growth was driven by new patient volume growth. Tavneos, approved for the treatment of patients with ANCA-associated vasculitis, a serious systemic autoimmune disease, was added to Amgen’s portfolio with the 2022 acquisition of ChemoCentryx.
Established Products
Total sales of established products, which include Epogen, Aranesp, Parsabiv and Neulasta, decreased 30% year over year in the third quarter.
Operating Margins Rise
Adjusted operating margin declined 0.5 percentage points to 52.0% in the quarter. Adjusted operating expenses increased 4% to $3.50 billion.
R&D expenses fell 2% year over year to $1.07 billion. SG&A spending rose 1% to $1.29 billion.
Adjusted tax rate was 16.1% for the quarter, a 3.2-point increase from the year-ago quarter.
2023 Guidance Raised
Following the completion of the Horizon acquisition, Amgen updated its previously issued revenue and earnings guidance for 2023.
Revenues are now expected in the range of $28.0 billion to $28.4 billion, up from the previous expectation of $26.6 billion to $27.4 billion.
Adjusted earnings are expected in the range of $18.20 to $18.80, up from the prior expectation of $17.80 to $18.80 per share. Adjusted EPS in the fourth quarter is expected to be lower than the third quarter due to increased investments in pipeline candidates like maridebart cafraglutide, olpasiran and AMG 193. In addition, the recognition of interest expense related to the Horizon financing will also hurt EPS in the fourth quarter.
Adjusted cost of sales as a percent of product sales is expected to be 16% to 17% in 2023 (maintained).
Adjusted R&D costs are expected to increase by about 10% year over year from the 2022 level versus the prior expectation of 5%. S&A spending is expected to decrease slightly year over year, driven by productivity improvements (maintained). Total operating expenses are expected to increase around 10% versus the prior expectation of 3% from 2022 level due to the closing of the Horizon acquisition. Amgen expects operating margin as a percentage of product sales to be roughly 50% in 2023.
The adjusted tax rate is expected to be in the range of 16.5% to 17.0% (previously 17.5%-18.5%), while capital expenditures are now expected to be approximately $950 million (previously $925 million). Amgen expects to buy back shares worth not more than $500 million (maintained) in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Amgen has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 upward for the stock, and the magnitude of these revisions has been net zero. Notably, Amgen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Amgen is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Deciphera Pharmaceuticals, Inc. (DCPH - Free Report) , a stock from the same industry, has gained 4.6%. The company reported its results for the quarter ended September 2023 more than a month ago.
Deciphera Pharmaceuticals, Inc. reported revenues of $43.31 million in the last reported quarter, representing a year-over-year change of +20.4%. EPS of -$0.58 for the same period compares with -$0.55 a year ago.
Deciphera Pharmaceuticals, Inc. is expected to post a loss of $0.59 per share for the current quarter, representing a year-over-year change of +1.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.5%.
Deciphera Pharmaceuticals, Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Amgen (AMGN) Up 2.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Amgen (AMGN - Free Report) . Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Amgen due for a pullback? 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.
Beats on Q3 Earnings, Lags Sales, Ups View
Amgen reported third-quarter 2023 adjusted earnings of $4.96 per share, which beat the Zacks Consensus Estimate of $4.65. Earnings rose 6% year over year due to higher revenues, which were partially offset by higher operating costs.
Total revenues of $6.90 billion missed the Zacks Consensus Estimate of $6.96 billion. Total revenues rose 4% year over year, driven by higher product sales.
Total product revenues increased 5% from the year-ago quarter to $6.55 billion (U.S.: $4.69 billion; ex-U.S.: $1.86 billion). Higher volumes were partially offset by lower selling prices of several drugs. Volumes rose 11% in the quarter, partially offset by a 3% lower net selling price and 3% unfavorable changes to estimated sales deductions.
Other revenues were $355 million in the quarter, down 14.5% year over year due to lower revenues from its COVID-19 manufacturing collaboration.
The company witnessed robust volume growth across all its three therapeutic areas, general medicine, inflammation and hematology-oncology portfolios.
Performance of Key Drugs
General Medicine
Prolia revenues came in at $986 million, up 14% from the year-ago quarter, driven by volume growth and higher net selling prices. Prolia sales beat the Zacks Consensus Estimate of $983 million but missed our model estimate of $992 million. Prolia volumes are expected to continue to grow.
Evenity recorded sales of $307 million in the quarter, up 53% year over year, driven by volume growth in and outside the United States. Evenity sales beat the Zacks Consensus Estimate of $284 million as well as our model estimate of $289 million.
Repatha generated revenues of $406 million, up 31% year over year, as higher volume was partially offset by lower prices due to new formulary coverage by CVS in July for commercial patients. The volume growth was backed by a record number of new patients starting treatment. Repatha sales marginally missed the Zacks Consensus Estimate of $407 million but beat our model estimate of $400 million.
Aimovig recorded sales of $94 million in the quarter, down 12% year over year due to lower net selling price.
Hematology-Oncology
Xgeva delivered revenues of $519 million, up 5% year over year, driven by higher net selling prices. Xgeva sales missed the Zacks Consensus Estimate and our model estimate of $522 million and $527 million, respectively.
Kyprolis recorded sales of $349 million, up 10% year over year, driven by volume growth.
Vectibix revenues came in at $252 million, up 2% year over year, driven by volume growth and higher selling price, which were partially offset by unfavorable foreign exchange impact.
Nplate sales rose 45% to $419 million, driven by volume growth, driven by a $142 million order from the U.S. government. Amgen expects to fulfill another $62 million order from the U.S. government in the fourth quarter.
Blincyto sales increased 55% from the year-ago period to $220 million, also driven by volume growth as the drug benefited from broad prescribing for patients with B-cell precursor ALL and updated NCCN guidelines that were issued in May.
Lumakras/Lumykras recorded sales of $52 million in the quarter, down 31% from the year-ago period, due to unfavorable changes to estimated sales deductions related to ongoing reimbursement negotiations in France. Lumakras/Lumykras sales missed the Zacks Consensus Estimate of $87 million as well as our model estimate of $95 million.
In oncology biosimilars, sales of Kanjinti (Amgen’s biosimilar of Roche’s Herceptin) were $20 million, down 72% year over year due to lower pricing and volumes as a result of increased competition.
Sales of Mvasi (biosimilar of Roche’s Avastin) were $213 million in the quarter, up 2% year over year, driven by volume growth and favorable changes to estimated sales deductions, which were partially offset by lower pricing.
Inflammation
Sales of Otezla were $567 million in the quarter, down 10%, due to lower pricing, unfavorable changes to estimated sales deductions and lower inventory levels. Otezla sales in the United States continue to be hurt by free drug programs launched by new competitors. In the United States, Otezla sales price declined due to higher rebates to support expanded access for commercial and Medicare Part D patients. Otezla sales missed the Zacks Consensus Estimate of $635 as well as our estimate of $620 million.
On the conference call, Amgen said it is seeing a reduced impact of the free drug programs. Amgen is also making investments to educate physicians about the benefits of Otezla for appropriate patients and has increased the Otezla sales force by 20%. Amgen expects these initiatives to drive Otezla’s return to growth.
Enbrel revenues of $1.04 billion declined 6% year over year due to unfavorable changes to estimated sales deductions, which offset the impact of slightly improved volumes. Enbrel sales beat the Zacks Consensus Estimate and our estimate, both of which stood at $1.02 billion. Similar to the second quarter, improved payer coverage led to increase in new patients, which, in turn, led to some better volume growth in the third quarter. Amgen expects improved coverage to continue to lead to new patient growth and thus support volumes. However, prices are expected to continue to decline.
Newly approved asthma drug, Tezspire (tezepelumab) recorded sales of $161 million in the quarter, up 21% sequentially, driven by volume growth. Tezspire volumes benefited from the launch of a self-administered, pre-filled, single-use pen formulation of the drug in the first quarter, improving patient convenience and accessibility and also more flexibility in treatment options.
Amgevita sales were $152 million in the quarter, up 30% year over year, driven by 53% volume growth, partially offset by lower inventory levels and net selling price.
New drug Tavneos generated $37 million in sales in the third quarter compared with $30 million in the previous quarter. The drug’s 23% sequential growth was driven by new patient volume growth. Tavneos, approved for the treatment of patients with ANCA-associated vasculitis, a serious systemic autoimmune disease, was added to Amgen’s portfolio with the 2022 acquisition of ChemoCentryx.
Established Products
Total sales of established products, which include Epogen, Aranesp, Parsabiv and Neulasta, decreased 30% year over year in the third quarter.
Operating Margins Rise
Adjusted operating margin declined 0.5 percentage points to 52.0% in the quarter. Adjusted operating expenses increased 4% to $3.50 billion.
R&D expenses fell 2% year over year to $1.07 billion. SG&A spending rose 1% to $1.29 billion.
Adjusted tax rate was 16.1% for the quarter, a 3.2-point increase from the year-ago quarter.
2023 Guidance Raised
Following the completion of the Horizon acquisition, Amgen updated its previously issued revenue and earnings guidance for 2023.
Revenues are now expected in the range of $28.0 billion to $28.4 billion, up from the previous expectation of $26.6 billion to $27.4 billion.
Adjusted earnings are expected in the range of $18.20 to $18.80, up from the prior expectation of $17.80 to $18.80 per share. Adjusted EPS in the fourth quarter is expected to be lower than the third quarter due to increased investments in pipeline candidates like maridebart cafraglutide, olpasiran and AMG 193. In addition, the recognition of interest expense related to the Horizon financing will also hurt EPS in the fourth quarter.
Adjusted cost of sales as a percent of product sales is expected to be 16% to 17% in 2023 (maintained).
Adjusted R&D costs are expected to increase by about 10% year over year from the 2022 level versus the prior expectation of 5%. S&A spending is expected to decrease slightly year over year, driven by productivity improvements (maintained). Total operating expenses are expected to increase around 10% versus the prior expectation of 3% from 2022 level due to the closing of the Horizon acquisition. Amgen expects operating margin as a percentage of product sales to be roughly 50% in 2023.
The adjusted tax rate is expected to be in the range of 16.5% to 17.0% (previously 17.5%-18.5%), while capital expenditures are now expected to be approximately $950 million (previously $925 million). Amgen expects to buy back shares worth not more than $500 million (maintained) in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Amgen has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 upward for the stock, and the magnitude of these revisions has been net zero. Notably, Amgen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Amgen is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Deciphera Pharmaceuticals, Inc. (DCPH - Free Report) , a stock from the same industry, has gained 4.6%. The company reported its results for the quarter ended September 2023 more than a month ago.
Deciphera Pharmaceuticals, Inc. reported revenues of $43.31 million in the last reported quarter, representing a year-over-year change of +20.4%. EPS of -$0.58 for the same period compares with -$0.55 a year ago.
Deciphera Pharmaceuticals, Inc. is expected to post a loss of $0.59 per share for the current quarter, representing a year-over-year change of +1.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.5%.
Deciphera Pharmaceuticals, Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.