We expect Amgen, Inc. AMGN to beat expectations when it reports third-quarter 2020 results on Oct 28, after market close. In the last reported quarter, the company delivered an earnings surprise of 11.55%.
The large biotech’s performance has been pretty impressive, with earnings beating estimates in each of the trailing four quarters. The company delivered a four-quarter earnings surprise of 8.58%, on average.
Amgen Inc. Price and EPS Surprise
Amgen Inc. price-eps-surprise | Amgen Inc. Quote
Amgen’s stock has declined 5.4% this year so far compared with an decrease of 4.1% for the industry.
Factors to Consider
Due to the COVID-19 pandemic, interruptions to physician-patient interactions (due to decline in patient visits to doctors) led to delays in diagnosis and treatment of several of Amgen’s drugs like Prolia, Xgeva, Kyprolis in the second quarter. However, the negative impact from COVID-19 is likely to have been much less in the third quarter. It remains to be seen if sales of these drugs improved in the third quarter.
However, higher demand is likely to have benefited sales of Blincyto and Parsabiv in the third quarter. Meanwhile, COVID-19 may have benefited sales of Otezla as it provides a convenient oral formulation and is conducive to telemedicine. The Zacks Consensus Estimate for Otezla is $583 million in the quarter.
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.
The respective Zacks Consensus Estimate for Prolia, Xgeva, Blincyto, Parsabiv, Repatha and Kyprolis sales is pegged at $681 million, $475 million, $94 million, $197 million, $214 million and $270 million.
Sales of new drug, Evenity are expected to have been soft in the third quarter as the first half of 2020 benefited from larger shipments to Amgen’s Japan-based partner, Astellas. The Zacks Consensus Estimate for Evenity is $104 million.
Also, increasing branded and generic competition for its legacy products like Enbrel, Aranesp, Epogen, Neupogen, Neulasta and Sensipar are likely to have hurt the top line.
Amgen’s biosimilars drugs may have once again been an important contributor to top-line growth driven by the launches of Kanjinti (Amgen’s biosimilar of Roche’s RHHBY Herceptin) and Mvasi (biosimilar of Roche’s Avastin) in the United States in 2019. However, it remains to be seen if increasing competitive pressure on Kanjinti and Mvasi because of the launch of competing biosimilar products impacted sales when the company reports third-quarter results.
Operating expenses are expected to have been meaningfully higher in the third quarter due to investments in pipeline due to acceleration in clinical trial and lab activity and launch preparation for its late-stage pipeline products.
Our proven model predicts an earnings beat for Amgen in the soon-to-be-reported quarter because it has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise.
Earnings ESP: Amgen’s Earnings ESP is +0.20% as the Zacks Consensus Estimate of $3.74 is lower than the Most Accurate Estimate of $3.75. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Amgen has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Another Stock to Consider
Here is a large biotech stock that you may also want to consider, as our model shows that it has the right combination of elements to post an earnings beat this season.
Incyte INCY has an Earnings ESP of +5.35% and a Zacks Rank #3.
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