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Amgen (AMGN) Down 6.5% 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 6.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Q4 Earnings Top, Horizon Drugs Drive Sales
Amgen reported fourth-quarter 2023 adjusted earnings of $4.71 per share, which beat the Zacks Consensus Estimate of $4.66. Earnings rose 15% year over year on higher revenues, which were partially offset by higher operating costs and higher interest expenses.
Total revenues of $8.2 billion marginally beat the Zacks Consensus Estimate of $8.16 billion. Total revenues rose 20% year over year, driven by higher product sales.
Total product revenues increased 20% from the year-ago quarter to $7.83 billion (U.S.: $5.87 billion; ex-U.S.: $1.96 billion). Higher volumes were partially offset by lower selling prices of several drugs. Volumes rose 23% in the quarter, partially offset by a 3% lower net selling price.
Other revenues were $363 million in the quarter, up 26.5% year over year.
Products like Prolia, Repatha, Blincyto and Evenity achieved double-digit volume growth in the quarter. Horizon’s products added $954 million in sales in the quarter. Excluding the contribution from Horizon, product sales grew 5% while volumes rose 9%.
Performance of Key Drugs
General Medicine
Prolia revenues came in at $1.1 billion, up 12% from the year-ago quarter, driven by volume growth (10%) and higher net selling prices. Prolia sales beat the Zacks Consensus Estimate of $1.05 billion as well as our model estimate of $1.03 billion.
Evenity recorded sales of $318 million in the quarter, up 41% year over year, driven by solid volume growth in and outside the United States. Evenity sales slightly missed the Zacks Consensus Estimate of $322 million as well as our model estimate of $318.2 million.
Repatha generated revenues of $417 million, up 25% year over year, as volume growth of 35% was partially offset by lower prices due to new formulary coverage by CVS in July for commercial patients. Repatha sales missed the Zacks Consensus Estimate of $428 million and our model estimate of $426.5 million. Amgen expects the additional coverage to lead to strong volume growth, which should more than offset declining net selling price.
Aimovig recorded sales of $78 million in the quarter, down 32% year over year due to lower net selling price.
Hematology-Oncology
Xgeva delivered revenues of $527 million, up 9% year over year, driven by higher net selling prices.
Kyprolis recorded sales of $350 million, up 8% year over year, driven by volume growth.
Vectibix revenues came in at $251 million, up 5% year over year, driven by volume growth.
Nplate sales declined 18% to $386 million due to the unfavorable timing of an order from the United States government. Excluding the unfavorable timing of the U.S. government orders, Nplate sales grew 23% year over year for the fourth quarter, driven by volume growth across its U.S. and ex-U.S. regions.
Blincyto sales increased 47% from the year-ago period to $241 million, driven by volume growth as the drug benefited from broad prescribing for patients with B-cell precursor acute lymphoblastic leukemia (ALL).
Lumakras/Lumykras recorded sales of $77 million in the quarter, up 8% from the year-ago period due to higher volumes and net selling prices. Lumakras/Lumykras sales missed the Zacks Consensus Estimate of $90 million as well as our model estimate of $92.2 million.
In oncology biosimilars, sales of Kanjinti (Amgen’s biosimilar of Roche’s Herceptin) were $42 million, down 33% year over year due to lower pricing and volumes as a result of increased competition.
Sales of Mvasi (biosimilar of Roche’s Avastin) were $188 million in the quarter, down 8% year over year, due to lower pricing, which offset the impact of volume growth.
Inflammation
Sales of Otezla were $629 million in the quarter, up 2%, due to favorable changes to estimated sales deductions and 3% volume growth which offset the impact of lower pricing and lower inventory levels. On the fourth-quarter conference call, Amgen said that it is seeing a reduced impact of the free drug programs launched by new competitors in the United States, which had hurt sales in the past few quarters. Otezla sales beat the Zacks Consensus Estimate of $618.0 million as well as our estimate of $606.4 million.
Enbrel revenues of $1.02 billion declined 8% year over year due to unfavorable changes to estimated sales deductions and lower pricing, which offset the impact of slightly improved volumes in the United States. Enbrel sales missed the Zacks Consensus Estimate as well as our model estimate of $1.06 billion.
Improved payer coverage led to an increase in new patients, which, in turn, resulted in some better volume growth for Enbrel in the past three quarters. However, prices are expected to continue to decline due to higher rebates to maintain broad first-line payer coverage and changes in patient mix.
Sales of Otezla and Enbrel are expected to be lower in the first quarter of 2024 compared to the other quarters per historical trends due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S. patients work through deductibles.
Newly approved asthma drug Tezspire (tezepelumab) recorded sales of $177 million in the quarter, up 10% 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. The pen formulation helped expand coverage with major pharmacy benefit managers, which led to higher new patient growth in 2023.
Amgevita sales were $160 million in the quarter, up 34% year over year, driven by 35% volume growth.
Rare Disease
Amgen closed the acquisition of Horizon Therapeutics for $27.8 billion on Oct 6, 2023, which added several rare disease drugs like Tepezza, Krystexxa and Uplizna to AMGN’s portfolio.
Tepezza, Krystexxa and Uplizna generated sales of $448 million, $272 million and $65 million from Oct 6 to Dec 31, 2023.
New drug Tavneos generated $44 million in sales in the fourth quarter compared with $37 million in the previous quarter. The drug’s 19% sequential growth was driven by new patient volume growth. Tavneos, approved for the treatment of patients with ANCA-associated vasculitis, a severe 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 10% year over year in the quarter.
Costs Rise
Adjusted operating margin rose 0.8 percentage points to 46.7% in the quarter. Adjusted operating expenses increased 18% to $4.54 billion including incremental expenses from Horizon. Excluding the impact of Horizon, adjusted operating expenses increased 3%.
R&D expenses rose 16% year over year to $1.49 billion. SG&A spending rose 20% to $1.76 billion.
The adjusted tax rate was 15.9% for the quarter, a 2.5-point increase from the year-ago quarter.
2023 Results
Full-year 2023 sales rose 7% to $28.2 billion, which slightly beat the Zacks Consensus Estimate of $28.1 billion. Sales were within the guided range of $28.0 billion to $28.4 billion.
Adjusted earnings for 2023 were $18.65 per share, up 5% year over year. Earnings beat the Zacks Consensus Estimate of $18.61 per share and were within the guided range of $18.20 to $18.80.
2024 Guidance
In 2024, the company expects to record revenues in the range of $32.4 billion to $33.8 billion. Amgen expects continued volume-driven growth of Repatha, Tezspire, Evenity, Prolia and Blincyto in 2024.
Other revenue is expected to be in the range of approximately $1.3 billion to $1.4 billion.
Adjusted earnings are expected in the range of $18.90 to $20.30.
Adjusted cost of sales as a percent of product sales is expected to be 17% to 18% in 2024. R&D costs are expected to increase approximately 20% in 2024. Adjusted SG&A costs are expected to be between 21% and 22% of product sales in 2024. Adjusted operating margin is expected to be approximately 48% in 2024, lower than 49.7% in 2023 due to the dilution from the Horizon acquisition.
The adjusted tax rate is expected to be in the range of 16.0% to 17.0%, while capital expenditures are expected to be approximately $1.1 billion. Amgen expects to buy back shares worth not more than $500 million in 2024.
First-Quarter 2024 Outlook
Product sales are expected to be lowest in the first quarter of 2024 per historical trends due to the impact of benefit plan changes, insurance re-verification and increased co-pay expenses as U.S. patients work through deductibles. First-quarter 2024 total revenues are expected to grow roughly 20% year over year.
Adjusted operating margin is expected to be roughly 43% in the first quarter, which is less than the full year expectation of 48%. Management expects margins to increase each subsequent quarter following the first.
Pipeline Update
Along with the earnings release, the company announced that enrollment had been completed in a phase II study on its GLP-1 receptor candidate, maridebart cafraglutide, for obesity. Top-line data from the study is expected in late 2024. The company recently added another part to this study to explore the candidate’s ability to achieve durable weight loss beyond 52 weeks. Amgen is planning to conduct a comprehensive phase III program on the candidate across multiple indications.
Initial top-line data from the phase I study on AMG 786, Amgen’s small molecule obesity candidate, is expected in the first half of 2024. AMG 786 is not an incretin-based therapy and has a different target than maridebart cafraglutide.
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 -11.72% 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 B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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.
Performance of an Industry Player
Amgen is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Bristol Myers Squibb (BMY - Free Report) , a stock from the same industry, has gained 9.8%. The company reported its results for the quarter ended December 2023 more than a month ago.
Bristol Myers reported revenues of $11.48 billion in the last reported quarter, representing a year-over-year change of +0.6%. EPS of $1.70 for the same period compares with $1.82 a year ago.
Bristol Myers is expected to post earnings of $1.53 per share for the current quarter, representing a year-over-year change of -25.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Bristol Myers. Also, the stock has a VGM Score of B.
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Amgen (AMGN) Down 6.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Amgen (AMGN - Free Report) . Shares have lost about 6.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Q4 Earnings Top, Horizon Drugs Drive Sales
Amgen reported fourth-quarter 2023 adjusted earnings of $4.71 per share, which beat the Zacks Consensus Estimate of $4.66. Earnings rose 15% year over year on higher revenues, which were partially offset by higher operating costs and higher interest expenses.
Total revenues of $8.2 billion marginally beat the Zacks Consensus Estimate of $8.16 billion. Total revenues rose 20% year over year, driven by higher product sales.
Total product revenues increased 20% from the year-ago quarter to $7.83 billion (U.S.: $5.87 billion; ex-U.S.: $1.96 billion). Higher volumes were partially offset by lower selling prices of several drugs. Volumes rose 23% in the quarter, partially offset by a 3% lower net selling price.
Other revenues were $363 million in the quarter, up 26.5% year over year.
Products like Prolia, Repatha, Blincyto and Evenity achieved double-digit volume growth in the quarter. Horizon’s products added $954 million in sales in the quarter. Excluding the contribution from Horizon, product sales grew 5% while volumes rose 9%.
Performance of Key Drugs
General Medicine
Prolia revenues came in at $1.1 billion, up 12% from the year-ago quarter, driven by volume growth (10%) and higher net selling prices. Prolia sales beat the Zacks Consensus Estimate of $1.05 billion as well as our model estimate of $1.03 billion.
Evenity recorded sales of $318 million in the quarter, up 41% year over year, driven by solid volume growth in and outside the United States. Evenity sales slightly missed the Zacks Consensus Estimate of $322 million as well as our model estimate of $318.2 million.
Repatha generated revenues of $417 million, up 25% year over year, as volume growth of 35% was partially offset by lower prices due to new formulary coverage by CVS in July for commercial patients. Repatha sales missed the Zacks Consensus Estimate of $428 million and our model estimate of $426.5 million. Amgen expects the additional coverage to lead to strong volume growth, which should more than offset declining net selling price.
Aimovig recorded sales of $78 million in the quarter, down 32% year over year due to lower net selling price.
Hematology-Oncology
Xgeva delivered revenues of $527 million, up 9% year over year, driven by higher net selling prices.
Kyprolis recorded sales of $350 million, up 8% year over year, driven by volume growth.
Vectibix revenues came in at $251 million, up 5% year over year, driven by volume growth.
Nplate sales declined 18% to $386 million due to the unfavorable timing of an order from the United States government. Excluding the unfavorable timing of the U.S. government orders, Nplate sales grew 23% year over year for the fourth quarter, driven by volume growth across its U.S. and ex-U.S. regions.
Blincyto sales increased 47% from the year-ago period to $241 million, driven by volume growth as the drug benefited from broad prescribing for patients with B-cell precursor acute lymphoblastic leukemia (ALL).
Lumakras/Lumykras recorded sales of $77 million in the quarter, up 8% from the year-ago period due to higher volumes and net selling prices. Lumakras/Lumykras sales missed the Zacks Consensus Estimate of $90 million as well as our model estimate of $92.2 million.
In oncology biosimilars, sales of Kanjinti (Amgen’s biosimilar of Roche’s Herceptin) were $42 million, down 33% year over year due to lower pricing and volumes as a result of increased competition.
Sales of Mvasi (biosimilar of Roche’s Avastin) were $188 million in the quarter, down 8% year over year, due to lower pricing, which offset the impact of volume growth.
Inflammation
Sales of Otezla were $629 million in the quarter, up 2%, due to favorable changes to estimated sales deductions and 3% volume growth which offset the impact of lower pricing and lower inventory levels. On the fourth-quarter conference call, Amgen said that it is seeing a reduced impact of the free drug programs launched by new competitors in the United States, which had hurt sales in the past few quarters. Otezla sales beat the Zacks Consensus Estimate of $618.0 million as well as our estimate of $606.4 million.
Enbrel revenues of $1.02 billion declined 8% year over year due to unfavorable changes to estimated sales deductions and lower pricing, which offset the impact of slightly improved volumes in the United States. Enbrel sales missed the Zacks Consensus Estimate as well as our model estimate of $1.06 billion.
Improved payer coverage led to an increase in new patients, which, in turn, resulted in some better volume growth for Enbrel in the past three quarters. However, prices are expected to continue to decline due to higher rebates to maintain broad first-line payer coverage and changes in patient mix.
Sales of Otezla and Enbrel are expected to be lower in the first quarter of 2024 compared to the other quarters per historical trends due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S. patients work through deductibles.
Newly approved asthma drug Tezspire (tezepelumab) recorded sales of $177 million in the quarter, up 10% 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. The pen formulation helped expand coverage with major pharmacy benefit managers, which led to higher new patient growth in 2023.
Amgevita sales were $160 million in the quarter, up 34% year over year, driven by 35% volume growth.
Rare Disease
Amgen closed the acquisition of Horizon Therapeutics for $27.8 billion on Oct 6, 2023, which added several rare disease drugs like Tepezza, Krystexxa and Uplizna to AMGN’s portfolio.
Tepezza, Krystexxa and Uplizna generated sales of $448 million, $272 million and $65 million from Oct 6 to Dec 31, 2023.
New drug Tavneos generated $44 million in sales in the fourth quarter compared with $37 million in the previous quarter. The drug’s 19% sequential growth was driven by new patient volume growth. Tavneos, approved for the treatment of patients with ANCA-associated vasculitis, a severe 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 10% year over year in the quarter.
Costs Rise
Adjusted operating margin rose 0.8 percentage points to 46.7% in the quarter. Adjusted operating expenses increased 18% to $4.54 billion including incremental expenses from Horizon. Excluding the impact of Horizon, adjusted operating expenses increased 3%.
R&D expenses rose 16% year over year to $1.49 billion. SG&A spending rose 20% to $1.76 billion.
The adjusted tax rate was 15.9% for the quarter, a 2.5-point increase from the year-ago quarter.
2023 Results
Full-year 2023 sales rose 7% to $28.2 billion, which slightly beat the Zacks Consensus Estimate of $28.1 billion. Sales were within the guided range of $28.0 billion to $28.4 billion.
Adjusted earnings for 2023 were $18.65 per share, up 5% year over year. Earnings beat the Zacks Consensus Estimate of $18.61 per share and were within the guided range of $18.20 to $18.80.
2024 Guidance
In 2024, the company expects to record revenues in the range of $32.4 billion to $33.8 billion. Amgen expects continued volume-driven growth of Repatha, Tezspire, Evenity, Prolia and Blincyto in 2024.
Other revenue is expected to be in the range of approximately $1.3 billion to $1.4 billion.
Adjusted earnings are expected in the range of $18.90 to $20.30.
Adjusted cost of sales as a percent of product sales is expected to be 17% to 18% in 2024. R&D costs are expected to increase approximately 20% in 2024. Adjusted SG&A costs are expected to be between 21% and 22% of product sales in 2024. Adjusted operating margin is expected to be approximately 48% in 2024, lower than 49.7% in 2023 due to the dilution from the Horizon acquisition.
The adjusted tax rate is expected to be in the range of 16.0% to 17.0%, while capital expenditures are expected to be approximately $1.1 billion. Amgen expects to buy back shares worth not more than $500 million in 2024.
First-Quarter 2024 Outlook
Product sales are expected to be lowest in the first quarter of 2024 per historical trends due to the impact of benefit plan changes, insurance re-verification and increased co-pay expenses as U.S. patients work through deductibles. First-quarter 2024 total revenues are expected to grow roughly 20% year over year.
Adjusted operating margin is expected to be roughly 43% in the first quarter, which is less than the full year expectation of 48%. Management expects margins to increase each subsequent quarter following the first.
Pipeline Update
Along with the earnings release, the company announced that enrollment had been completed in a phase II study on its GLP-1 receptor candidate, maridebart cafraglutide, for obesity. Top-line data from the study is expected in late 2024. The company recently added another part to this study to explore the candidate’s ability to achieve durable weight loss beyond 52 weeks. Amgen is planning to conduct a comprehensive phase III program on the candidate across multiple indications.
Initial top-line data from the phase I study on AMG 786, Amgen’s small molecule obesity candidate, is expected in the first half of 2024. AMG 786 is not an incretin-based therapy and has a different target than maridebart cafraglutide.
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 -11.72% 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 B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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.
Performance of an Industry Player
Amgen is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Bristol Myers Squibb (BMY - Free Report) , a stock from the same industry, has gained 9.8%. The company reported its results for the quarter ended December 2023 more than a month ago.
Bristol Myers reported revenues of $11.48 billion in the last reported quarter, representing a year-over-year change of +0.6%. EPS of $1.70 for the same period compares with $1.82 a year ago.
Bristol Myers is expected to post earnings of $1.53 per share for the current quarter, representing a year-over-year change of -25.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Bristol Myers. Also, the stock has a VGM Score of B.