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Amgen Reports an Unusual Slide Backward

Cory Renauer, The Motley Fool

Managing the decline of key products isn't easy, but Amgen's (NASDAQ: AMGN) done a great job of producing bottom-line gains despite top-line revenue that has flattened out in recent quarters. That didn't happen during the first three months of 2019, making this the most disappointing quarterly report we've seen from this biotech in a very long time.

Amgen results: The raw numbers

Metric Q1 2019 Q1 2018 Year-Over-Year Change
Revenue $5.56 billion $5.55 billion 0%
Income from operations $2.47 billion $2.7 billion (9%)
Earnings per share $3.18 $3.25 (2%)

Data source: Amgen.

What happened with Amgen this quarter?

Let's start with the good news first:

  • First-quarter sales of Repatha, Amgen's next-generation cholesterol-reducing injection, rose 15% compared with the previous year to $141 million.
  • Sales of the company's first bi-specific antibody for the treatment of cancer, Blincyto, jumped 41% higher year on year to $69 million.
  • Sales of Prolia, the company's osteoporosis treatment, rose 20% to $592 million. 
  • Amgen's multiple myeloma drug, Kyprolis, rose 10% year on year to $245 million. 
  • Enbrel is still Amgen's best-selling drug after sales rose 4% year on year to $1.15 billion.

However, Amgen had far more disappointing news to report: 

  • Although Repatha, Prolia, and Kyprolis sales grew by double digits from a year ago, they've fallen in comparison with the last three months of 2018.
  • Sales of Aimovig, Amgen's new migraine drug, slid to $59 million from $95 million three months earlier. This is most likely due to fierce competition from Eli Lilly (NYSE: LLY) and Teva Pharmaceuticals (NYSE: TEVA), both of which launched new migraine drugs of their own late last year.
  • It isn't the sort of gain to be proud of, but Amgen's share of Aimovig sales could see a bump thanks to an ongoing attempt to wiggle out of a collaboration deal with Novartis (NYSE: NVS).
  • Calcium reduction treatment Sensipar was smacked by generic competition that drove sales 57% lower to $213 million.
  • Research and development expenses rose 16%, as the company's operating margin shrank to 46.8% from 51% a year earlier.
Guy in a lab coat taking notes with a clipboard.

Image source: Getty Images.

What management had to say

Despite a shrinking top and bottom line, Robert A. Bradway, Amgen's CEO, remained upbeat. "We continue to generate strong, volume-driven growth for our newer products, while effectively defending our mature products," he said. 

While it might not look as if the company's effectively defending its mature products right now, Amgen has one of the industry's top-rated legal teams. For example, generic versions of Sensipar earned approval over a year ago, but Amgen kept them from competing until early 2019. Also, Enbrel's been around since the late 1990s, but it's going to add around $4 billion to Amgen's top line this year.

Of course, it wouldn't be an Amgen earnings call if there weren't a slew of new drug candidates advancing through clinical stages. According to Bradway, the biotech is taking more shots on goal than ever before. "We are also advancing a record number of first-in-class molecules targeting significant areas of unmet need through our pipeline," he said.

In April, that pipeline delivered another new drug approval. Evenity is a new osteoporosis treatment option that's expected to earn peak annual sales of around $500 million.

Looking forward

Amgen didn't change the high end of its previously guided range for sales in 2019, but it did tighten it slightly. Now the company expects revenue to reach between $22 billion and $22.9 billion. Management lowered the top end of its earnings per share range by $0.02 and now expects between $11.68 and $12.73 per share.

It might be a few quarters before Amgen starts moving forward again, but we could hear some positive development updates soon. The company's gone all out to develop more bi-specific T-cell engagers, and we'll see updates from AMG 420 and AMG 212 at a medical conference in June. 

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.