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Amgen (AMGN) Down 2.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Amgen (AMGN). Shares have lost about 2.2% 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.

Q2 Earnings Top, COVID-Led Sales Woes to Linger

Amgen reported second-quarter 2021 earnings of $4.38 per share, which beat the Zacks Consensus Estimate of $4.13. Earnings rose 4% year over year due to higher revenues and lower share count.

Total revenues of $6.53 billion beat the Zacks Consensus Estimate of $6.43 billion. Total revenues rose 5% year over year as higher volumes offset lower net selling prices of several drugs. Sequentially, revenues rose 11%, slightly higher than management’s expectation of 7% to 10%.

Volume-driven growth from Repatha, Prolia, and Evenity and biosimilar drugs drove the top line in the quarter. However, lingering effects of COVID-19 and increased competitive pressure on some drugs continue to hurt sales.

Though the company did see recovery in patient visits and lab test procedure trends in the second quarter compared to the first quarter, they remained below the pre-pandemic levels. Moreover, new patient starts remained suppressed due to a cumulative decline in diagnoses rates amid the pandemic, a trend management expects to hurt its business in the second half too.

Total product revenues rose 3% from the year-ago quarter to $6.11 billion (U.S.: $4.37 billion; ex-U.S.: $1.74 billion). Volumes rose 8% while net selling prices declined 5% due to increased discounting and rebates to maintain formulary access in increasingly competitive categories.

Other revenues of $412 million rose 38.4% year over year due to recognition of revenues from the collaboration with Eli Lilly for the manufacture of COVID-19 antibodies.

Performance of Key Drugs

Prolia revenues came in at $814 million, up 24% from the year-ago quarter driven by volume growth as new and repeat patient volumes continued to recover from the impact of the pandemic

With most osteoporosis patients already receiving vaccinations and with diagnosis rates reaching almost 90% of pre-COVID-19 levels, Prolia sales are expected to continue to improve in the second half

Xgeva delivered revenues of $488 million, up 12% from the year-ago driven by volume growth as the market recovered from the effects of the pandemic.

Kyprolis recorded sales of $280 million, up 11% year over year due to higher volumes and price. Increased use of Kyprolis in combination with CD38 antibodies like Darzalex is expected to drive sales higher in the future quarters.

Repatha generated revenues of $286 million, up 43% year over year, as higher volume was partially offset by lower prices due to an increase in Medicare Part D patients receiving Repatha and entering the coverage gap. Amgen expects further reduction in global net price of Repatha in the second half.

Vectibix revenues came in at $239 million, up 23% year over year. Nplate sales rose 27% to $245 million. Blincyto sales increased 16% from the year-ago period to $108 million.

Parsabiv recorded sales of $71 million, down 62% due to changes in reimbursement rules for the drug, which hurt its volumes.

Aimovig recorded sales of $82 million in the quarter, down 16% year over year as volume growth was offset by lower net selling price, which was due to increased rebates to maintain patient access. Unfavorable changes to estimated sales deductions also hurt sales. Aimovig sales rose 24% sequentially.

Evenity recorded sales of $131 million in the quarter, up 30% year over year driven by volume growth in the United States due to growing demand trends in new and continuing patients. Sales declined in ex-U.S. markets.

Sales of Otezla were $534 million in the quarter, down 5% due to lower pricing and unfavorable changes to estimated sales deductions, which offset the positive impact of volume growth. New-to-brand prescription volume grew 10% year over year as patient visits to dermatologists improved.  However, this gain was offset by lower percentage of 90-day prescriptions and lower prescription refill rates. The recovery seen in the dermatology segment is expected to continue in the second half. Moreover, potential approval for the mild-to-moderate psoriasis indication and the upcoming launch in China could bring in additional sales for Otezla.

The company did not give any sales number for its newly approved drug, Lumakras (sotorasib) but did mention on the conference call that more than 2,000 patients have received Lumakras. KRAS testing of metastatic NSCLC patients stands at approximately 70%.

Biosimilar generated revenues of $567 million in the quarter driven by volume growth, which offset the impact of declines in net selling price due to increased competition. Sales of Kanjinti and Mvasi were $156 million and $294 million in the quarter, compared with $161 million and $294 million, respectively, in the previous quarter. Sales of Kanjinti declined sequentially in the second quarter due to unfavorable changes to estimated sales deduction. Kanjinti sales are expected to continue to decline in the second half due to lower pricing.

Amjevita sales were $107 million in the quarter, up 73% year over year.

In the second half, volume growth of biosimilars is expected to be offset by lower pricing due to increased competition.

However, sales of mature drugs like Enbrel, Aranesp, Epogen and Neulasta declined due to an array of branded and generic competitors. Enbrel revenues of $1.14 billion declined 8% year over year due to unfavorable changes in estimated sales deductions, lower volumes and price.

Aranesp revenues declined 5% from the prior-year quarter to $367 million. Revenues of the other ESA, Epogen, declined 19% to $130 million. Neulasta revenues declined 18% from the year-ago period to $486 million. Neupogen recorded 4% increase in sales to $51 million in the quarter. Sensipar/Mimpara revenues declined 70% to $24 million.

Operating Margins Decrease

Adjusted operating margin declined 410 basis points (bps) to 50.9%. Adjusted operating expenses rose 15% year over year in the quarter to $3.42 billion. SG&A spend rose 6% to $1.35 billion. R&D expenses rose 11% year over year to $1.04 billion driven by higher spend on early-stage pipeline, partially offset by lower spending on late-stage development program.

Adjusted tax rate was 12.6% for the quarter, a 1.0-point decline from the year-ago quarter.

Amgen repurchased 6.5 million shares worth $1.6 billion in the quarter and has $3.9 billion remaining under its stock repurchase authorization.

2021 Guidance

Amgen maintained its revenue guidance for 2021 in the range of $25.8 billion-$26.6 billion and adjusted earnings per share guidance in the range of $16.00 to $17.00 per share.

In 2021, other revenues are expected to be in the range of 1.4 billion to 1.5 billion.

Adjusted operating costs are expected to grow at the rate of 6-7% from last year. While R&D costs are expected to increase, SG&A expenses are expected to decline. Operating margin is expected to be roughly 50% in 2021. Adjusted tax rate is expected in the range of 13.5% to 14.5%.

Amgen plans to spend approximately $900 million for capital expenditures in 2021. The company expects to buy back shares at the upper end of the previously issued range of $3 billion to $5 billion through the year.


 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Amgen has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 B. 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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