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Amgen (AMGN) Q1 Earnings Top, to Study Otezla for Coronavirus

Zacks Equity Research

Amgen AMGN reported first-quarter 2020 earnings of $4.17 per share, which beat the Zacks Consensus Estimate of $3.70. Earnings rose 17% year over year driven by higher revenues and share count.

Total revenues of $6.16 billion in the quarter beat the Zacks Consensus Estimate of $6.0 billion. Total revenues rose 11% year over year.

Amgen’s stock has declined 0.8% this year so far against an increase of 2.7% for the industry.

 

 

Quarter in Detail

Total product revenues rose 12% from the year-ago quarter to $5.89 billion (U.S.: $4.28 billion; ex-U.S.: $1.62 billion). Increasing demand of Amgen’s newer drugs like Otezla and strong sales of biosimilar products were offset by the erosion of mature brands from biosimilar/new competition. Product sales growth was mostly driven by higher volumes (up 15%) as prices were lower for several drugs.

Other revenues of $267 million declined 1.5% in the quarter.

Prolia revenues came in at $654 million, up 10% from the year-ago quarter. Amgen saw volume increases for the product in January and February, which declined sharply in March due to the coronavirus outbreak as it requires in-office administration by a healthcare provider.

Xgeva delivered revenues of $481 million, up 2% from the year-ago quarter mainly due to higher demand, which drove volumes up 4% and, to a lesser extent, on higher selling price. Meanwhile, Amgen warned that sales of Xgeva may also be hurt due to disruptions in physician-patient interactions

Kyprolis recorded sales of $280 million, up 14% year over year, driven primarily by 21% volume growth in the United States, which was driven by expanded use in second and third-line multiple myeloma.

Repatha generated revenues of $229 million, up 62% 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 $202 million, up 19% year over year. Nplate sales rose 15% to $218 million. Blincyto sales increased 36% from the year-ago period to $94 million. Sales of all three drugs were driven by higher demand.

Parsabiv recorded sales of $175 million, up 39% driven by higher demand, which offset the impact of lower selling prices.

New migraine medicine, Aimovig recorded sales of $71 million in the quarter, lower than $98 million in the previous quarter as higher volumes were offset by lower price as Amgen expanded patient access with CVS Health. Aimovig volumes rose 46% in the quarter.

New osteoporosis drug, Evenity recorded sales of $100 million in the quarter compared with $85 million in the previous quarter, driven by strong uptake in both Japan and the United States where the product was launched last year. In the United States, where Evenity was launched in April 2019, sales were $37 million while international sales were $63 million.

Sales of Otezla were $479 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. Amgen said that COVID-19 may benefit future sales of Otezla as it provides a convenient oral formulation and is conducive to telemedicine.

Among biosimilars, Amjevita (biosimilar of AbbVie’s [ABBV] Humira) sales were $86 million in the quarter. Sales of Kanjinti (Amgen’s biosimilar of Roche’s RHHBY Herceptin) and Mvasi (biosimilar of Roche’s Avastin) were $119 million and $115 million in the quarter, compared with$103 million and $84 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 have beenfacing an array of branded and generic competitors.

Aranesp revenues rose 2% from the prior-year quarter to $414 million as higher unit demand and favorable changes in inventory offset the impact of lower net selling price.

Revenues of the other ESA, Epogen, declined 29% to $155 million due to lower selling prices and unfavorable changes in accounting estimates.

Neulasta revenues declined 40% from the year-ago period to $609 million due to the impact of biosimilar competition on demand and price.

Neupogen recorded 11% decline in sales to $65 million in the quarter. Enbrel delivered revenues of $1.15 billion, flat year over year as favorable changes in accounting estimates were offset by lower demand and selling prices.

Sensipar/Mimpara revenues declined 42% to $123 million due to several at-risk generic launches. Meanwhile, Amgen lost patent protection for Sensipar in several ex-U.S. countries this year, which should result in a significant decline in ex-U.S. sales in 2020.

Other product sales rose 5% to $64 million.

Operating Margins Increase

Adjusted operating margin rose 150 basis points (bps) to 53.9%. Adjusted operating expenses rose 7% year over year in the quarter to $2.99 billion.

SG&A spend rose12% to $1.29 billion due to Otezla-related commercial expenses. R&D expenses rose 8% year over year to $927 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.In January, Amgen entered into a collaboration with BeiGene to commercialize Xgeva, Kyprolis, and Blincyto in Chinaand also bought a 20.5% stake in the company.

2020 Outlook

Amgen re-affirmed its previously issued financial guidance for 2020. It expects revenues in the range of $25.0 billion-$25.6 billion, which indicates an increase from 2019 levels.

Adjusted earnings per share are anticipated in the range of $14.85-$15.60. Adjusted operating costs are expected to grow in a high single-digit percentage range year over year in 2020 versus prior expectation of low double-digit percentage range. 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, less than $700 million guided previously.

Our Take

Amgen delivered strong first-quarter results, beating estimates for both earnings and sales. However, like most other pharma/biotech companies, Amgen maintained its previously-issued financial guidance for 2020.

Although Amgen saw minimal business disruption from COVID-19 in the first quarter, it did see some signs of business disruption in the first few weeks of April. On the call, the company said that decline in visits of patients to doctors clinics due to the lockdowns may reduce new patient starts for some of its products.

Amgen expects to see a significant impact of the uncertainty related to COVID-19 in the second quarter, which it expects will stabilize and then improve in the second half of the year.  Meanwhile, increased utilization of patient affordability programs and changes in segment mix due to increased U.S. unemployment could negatively impact U.S. net prices

Amgen said, along with the earnings release, that it will begin clinical studies to evaluate inflammatory medicine Otezla to treat respiratory distress in late-stage COVID-19 patients.

Last month, Amgen announced a strategic partnership with Adaptive Biotechnologies to co-develop fully human neutralizing antibodies targeting SARS-CoV-2, the virus that causes COVID-19.

Amgen Inc. Price, Consensus and EPS Surprise

 

Amgen Inc. Price, Consensus and EPS Surprise

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

Amgen has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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