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Amgen (AMGN) Q2 Earnings Top, COVID-Led Sales Woes to Linger

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Amgen AMGN 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%.

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 LLY 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.

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.

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.

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.

Evenity recorded sales of $131 million in the quarter, up 30% year over year driven by volume growth.

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 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.

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. The KRAS inhibitor was approved for the treatment of patients with KRAS G12C-mutated locally advanced or metastatic non-small cell lung cancer (NSCLC) following at least one prior systemic therapy in May.

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 (Amgen’s biosimilar of Roche’s [RHHBY] Herceptin) and Mvasi (biosimilar of Roche’s Avastin) 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.

Amjevita (biosimilar of AbbVie’s Humira) sales were $107 million in the quarter, up 73% year over year.

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 4% 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. R&D expenses rose 11% year over year to $1.04 billion.

Maintains 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.

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.

Our Take

Amgen’s second-quarter results were better-than-expected as it beat estimates for both earnings and sales. 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.

Amgen’s stock was down 0.9% in after-hours trading on Tuesday. Amgen’s stock has risen 6.1% this year so far against a decrease of 1.1% for the industry.

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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, the pandemic continued to hurt new patient starts due to decline in diagnoses rates, a trend management expects to hurt its business in the second half too.

Nonetheless, the company expects to focus on the launch of Lumakras, a first-in-class lung cancer treatment, in the second half.

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

Amgen Inc. Price, Consensus and EPS Surprise

Amgen Inc. Price, Consensus and EPS Surprise
Amgen Inc. Price, Consensus and EPS Surprise

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


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