Amgen Beats on Q2 Earnings & Revs, Ups View & Plans Job Cuts - Analyst Blog

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Amgen ( AMGN ) reported second quarter 2014 earnings of $2.37 per share, well above the Zacks Consensus Estimate of $1.99 and the year-ago earnings of $1.88.

Total revenues increased 11% to $5,180 million in the second quarter of 2014, beating the Zacks Consensus Estimate of $4,875 million.

Including one-time items, second quarter earnings increased 22% to $2.01 per share.


Amgen Inc - Earnings Surprise | FindTheBest

The Quarter in Detail

Second quarter total product revenues increased 8% from the year-ago quarter to $4,949 million (U.S.: $3,758 million, ex-U.S.: $1,191 million) with products like Enbrel, Kyprolis, Prolia and Xgeva driving growth.

Revenues of Amgen's erythropoiesis-stimulating agent (ESA) Aranesp declined 1% from the year-ago quarter to $517 million (U.S.: $223 million; ex-U.S.: $294 million) reflecting lower demand. Revenues will continue to be impacted by practice patterns in both oncology and nephrology in the U.S. and price competition in Europe.

Revenues of Amgen's other ESA, Epogen, grew 2% to $512 million.

Worldwide revenues of Neulasta and Neupogen decreased 1% to $1,429 million in the second quarter. Amgen said that underlying demand was slightly impacted by short- and long-acting competition in the U.S. and Europe, respectively.

Enbrel delivered revenues of $1,243 million, up 7% from the year-ago quarter. Revenues benefited from an inventory build of about $60 million, price and strong underlying demand and segment growth. The company has been taking steps to improve Enbrel's performance which includes optimization of the sales force, higher direct-to-consumer (DTC) advertising and increased focus on appropriate access.

Second quarter 2014 Prolia revenues came in at $264 million, up 40% from the year-ago quarter due to higher demand. The response to a new DTC campaign, launched in January, has been strong and has resulted in an increase in patient awareness.

Meanwhile, Xgeva delivered second quarter 2014 revenues of $299 million, up 20% from the year-ago quarter due to higher demand.

Sensipar/Mimpara revenues increased 15% from the year-ago quarter to $298 million due to higher demand and price increases in the U.S. Vectibix revenues came in at $132 million during the quarter, up 42% from the year-ago quarter.

Kyprolis, an Onyx product, posted sales of $78 million, up 14.7% sequentially.

While second quarter 2014 R&D expenses increased 4% from the year-ago period, SG&A expenses declined 12%. Investment in late-stage clinical programs for Kyprolis and other candidates led to the increase in R&D spend. Meanwhile, the end of the Enbrel profit share arrangement with Pfizer ( PFE ) led to lower SG&A spend.

Amgen continues to progress with its pipeline. The company remains on track to file for approval of evolocumab (cholesterol management) in the third quarter. Amgen has already filed for regulatory approval of ivabradine (chronic heart failure). Meanwhile, the interim analysis of the ASPIRE study on Kyprolis in relapsed multiple myeloma patients, and the final analysis of the FOCUS study in relapsed refractory multiple myeloma patients should occur in the third quarter.

Announces Job Cuts

In addition to presenting second quarter results, Amgen announced a restructuring plan which will see the company cutting 2,400-2,900 positions (12% - 15% of the total work force) starting later this year and continuing through 2015. The job cuts will mostly be in the U.S. While Amgen will close its facilities in the states of Washington and Colorado, it will expand its presence in the biotech hubs of South San Francisco, CA and Cambridge, MA.

Amgen expects to cut expenses by about $700 million in 2016 compared to 2013. However, most of the savings will be reinvested in the company's efforts to launch new products.

Amgen is exploring other efficiency initiatives as well. We expect further updates once a business review meeting is conducted in the fourth quarter.

Ups 2014 Guidance

During 2014, Amgen expects to earn $8.20 - $8.40 per share on total revenues of $19.5 billion - $19.7 billion. Earlier this year, the company had guided towards earnings of $7.90 - $8.20 per share on total revenues of $19.2 billion - $19.6 billion. The Zacks Consensus Estimate for earnings and revenues are below the guidance range at $8.10 per share and $19.3 billion, respectively.

Our Take

Amgen's second quarter results were impressive with the company beating on all fronts. The company's new guidance is also above the Zacks Consensus Estimate. We are positive on the company's restructuring plan which should make it leaner and more cost-efficient. 

Amgen has quite a few catalysts coming up, the most important being the FOCUS data on Kyprolis that should be out this quarter. The inclusion of positive data in the label would boost sales.

Amgen currently carries a Zacks Rank # 3 (Hold). Better-ranked stocks in the biotech sector include Actelion ( ALIOF ) and Celgene ( CELG ) - both carry a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: PFE , CELG , AMGN , ALIOF

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