Markets

5 Things Amgen, Inc.'s Management Wants You to Know

Amgen reported its second-quarter earnings results two weeks ago, delivering yet another quarter of impressive growth and boosting full-year guidance.

For investors it means we can expect plenty of catalysts and
potentially more volatility than we've been accustomed to with
Amgen. It's also the perfect opportunity for Amgen to reignite
organic growth exclusive of acquisitions, share buybacks, and price
hikes.

Amgen Q2 slide presentation. Source: Amgen.

For investors it means we can expect plenty of catalysts and potentially more volatility than we've been accustomed to with Amgen. It's also the perfect opportunity for Amgen to reignite organic growth exclusive of acquisitions, share buybacks, and price hikes.

Late-stage trials and drug launches are expensive

And why is Amgen reducing its workforce? Because running large-scale stage 3 trials, manufacturing and stockpiling drugs for launch, and boosting a marketing staff and ad campaign surrounding new therapies is expensive.

Source: StockMonkeys.com , Flickr.

Amgen's announced sweeping reforms that'll see 12% to 15% of its workforce laid off and cuts coming from every department, including research and development. These cuts accounted for $700 million in expenses in 2013, implying that not only will Amgen's expenses be lowered, resulting in EPS-boosting benefits, but that it'll be able to reallocate some of these savings toward the higher expenses associated with its drug launches.

There's a reason Amgen bought this company

Though Amgen hasn't expressed any interest in additional acquisitions, its management team is quick to remind investors that there's a good reason Amgen ponied up $10.4 billion for Onyx Pharmaceuticals - and a big part of that is multiple myeloma drug Kyprolis.

As a third-line treatment for multiple myeloma Kyprolis delivered $78 million in revenue in the latest quarter, up 15% globally and 23% in the U.S. sequentially. But, the real allure of Kyprolis is in potentially expanding its indication to second-line.

Last week, Amgen announced in its planned interim analysis that patients treated with injectable Kyprolis in combination with Revlimid and low-dose dexamethasone lived a median of 26.3 months without their disease worsening as compared 17.6 months for the control arm treated with Revlimid and low-dose dexamethasone. This significant difference should form the basis of a regulatory filing in the first half of 2015. More importantly, it opens the door for Kyprolis to gallop toward its peak annual sales projections on Wall Street of between $2 billion and $3 billion.

Playing it safe

Source: Dr. Farouk , Flickr.

Even though shareholders would prefer to see Amgen littering pharmacy shelves with newly approved compounds, Amgen is taking the cautious approach to drug approvals when necessary. Evolocumab, an investigational therapy to treat dyslipidemia, has reported solid LDL-C-reducing results that make it a strong potential candidate.

However, Amgen noted its intent to hold back on seeking approval for its mini-doser. Instead, Amgen will seek approval for the device-drug combos which it feels most comfortable with and seek to add approval in conjunction with its once-monthly mini-doser shortly after initial approval. This is a smart move as it likely gives the injectable drug a better chance at approval, and also gives insurers more time to acquaint themselves with the product and presumably offer coverage.

This industry trend appears here to stay

Finally, when asked about his take on tax inversions in general and whether or not Amgen would be interested in such a move by ISI Group analyst Mark Schoenebaum, Bradway made it abundantly clear that he anticipates sectorwide consolidation to continue under this premise.

Corporate tax inversion is the process by which as U.S.-based business buys a company on foreign soil and relocates its headquarters to the overseas address. Bradway conveyed his displeasure with the corporate tax structure as it is now and suggested that Congress reform existing laws.

Amgen receives a lot of its cash from ex-U.S. countries and a one-time repatriation of its cash could be a very positive move for the company. At the moment Amgen's effective tax rates are already among the lowest in the industry, but I wouldn't rule out the possibility in the intermediate to long-term if nothing is done about corporate tax inversion laws that Amgen could seek to change its address through a merger.

Amgen's new drugs may offer plenty of potential, but this revolutionary technology could wind up leaving Amgen in its dust!

The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW .

The article 5 Things Amgen, Inc.'s Management Wants You to Know originally appeared on Fool.com.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong , track every pick he makes under the screen name TrackUltraLong , and check him out on Twitter, where he goes by the handle @TMFUltraLong .The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

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


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

In This Story

AMGN

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More