Amgen (AMGN) Earnings Beat Estimates in Q1, Revenues Up Y/Y

Amgen Inc.AMGN reported first-quarter 2018 earnings of $3.47 per share, which beat the Zacks Consensus Estimate of $3.23 by 7.4%. The bottom line also increased 10% compared with the year-ago figure.

Total revenues of $5.55 billion in the quarter marginally surpassed the Zacks Consensus Estimate of $5.46 billion. The top line also registered an increase of 2% year over year.

Shares of Amgen dipped almost 2% on Apr 24 in after-hours trading. However, the stock has declined 1.2% so far this year, comparing favorably with the 10.4% decrease of its industry .

Quarter in Detail

Total product revenues increased 3% from the year-ago quarter to $5.34 billion (U.S.: $4.15 billion; ex-U.S.: $1.20 billion), driven by double-digit unit growth across all the company's new and recently launched products including Repatha, Kyprolis, Prolia and Xgeva.

Revenues of Amgen's erythropoiesis-stimulating agent (ESA), Aranesp, declined 11% from the prior-year quarter to $454 million due to lower demand, primarily based on increased competition.

Revenues of the other ESA, Epogen, dropped 10% to $244 million on lower selling price due to a newly negotiated contract with DaVita Inc.

Neulasta revenues declined 5% to $1.16 billion from the year-ago period as lower demand was offset partially by favorable changes in net selling price and inventory.

Increased competition from PD-1s and other new cancer therapies is hurting demand for Neulasta. However, the Neulasta Onpro kit (on-body injector) continues to perform well, commanding a market share of about 62% in the United States for all Neulasta sales.

Notably, Neulasta and Epogen could start facing a biosimilar competition in the United States this year,which might hurt sales further.

Neupogen recorded a 30% decline in sales to $103 million due to biosimilar competition in the United States. Zarxio, Sandoz's {Novartis' NVS generic arm} biosimilar version of Neupogen, was launched in the United States in September 2015 and is affecting sales.

Enbrel delivered revenues of $1.11 billion, down 6% from the year-ago quarter on lower selling prices and stiffer competition, which hit demand. Prolia revenues came in at $494 million, up 16% from the year-ago quarter, backed by higher demand. The osteoporosis drug witnessed consistent growth in new patient starts and strong repeat injection rates, which drove year-over-year growth.

Meanwhile, Xgeva delivered revenues of $445 million, up 11% from the year-ago quarter mainly owing to higher demand.

Earlier this year, Amgen gained the FDA approval for an expanded label of Xgeva to include prevention ofskeletal-related events (SREs) inpatients with multiple myeloma. Until now, Xgeva was only accepted for the prevention of SREs in solid tumors in patients with bone metastases. The approval for the expanded patient population has driven sales of Xgeva this quarter. Additionally, this month, Xgeva gained an EU nod as well for the given indication.

Sensipar/Mimpara revenues increased 18% to $497 million mainly riding on higher demand.

Vectibix revenues came in at $169 million, up 11%, driven by higher demand.

Kyprolis recorded sales of $222 million, up 17% year over year, driven by increased demand and a robust uptake from outside U.S. markets.

Amgen's regulatory application in the United States to include the overall survival data from the ENDEAVOR study on the label of Kyprolis was granted an FDA approval in January 2018. The study demonstrated that a combination of Kyprolis plus dexamethasone led to superior overall survival when compared with Takeda's Velcade plus dexamethasone.

Blincyto sales surged 44% from the year-ago period to $49 million, reflecting rise in demand.

Notably, last month, Amgen announced that the FDA has granted an accelerated approval for a new indication of Blincyto to include treatment of patients with minimal residual disease (MRD)-positive B-cell precursor acute lymphoblastic leukemia (ALL).

Amgen's PCSK9 inhibitor, Repatha, generated revenues of $123 million compared with $98 million in the fourth quarter of 2017.

Uptake of the drug, which gained an FDA approval in August 2015, has not been very encouraging so far due to pricing and re-imbursement issues/payer restrictions. Sanofi SNY and partner Regeneron Pharmaceuticals REGN also faced similar issues with their PCSK9 inhibitor, Praluent.

In December 2017, Amgen gained an FDA approval to include a new indication - risk reduction of major cardiovascular events data - on Repatha's label based on data from the phase III cardiovascular outcomes study (FOURIER). With the cardiovascular indication approved to be included in Repatha's label,Amgen was hopeful that patient access to Repatha willimprove.

Last month, Amgen announced that the CHMP of the EMA has given a positive recommendation to its regulatory application seeking approval to include FOURIER data on the European label of Repatha.

Operating Margins

Adjusted operating margins declined 70 basis points (bps) to 56.9% due to higher operating costs.

SG&A spend increased 6% to $1 billion on higher investments to support new product launches. R&D expenses slipped 1% to $739 million compared with the year-ago figure

Amgen repurchased 56.4 million shares worth $10 billion and plans to buy back an incremental two to four billion of its shares in the second quarter of 2018.

2018 Guidance Revised

The company now expects its revenues in the range of $21.9-$22.8 billion compared with the previous prediction of $21.8-$22.8 billion. The Zacks Consensus Estimate for the metric in the current year stands at $22.70 billion.

Adjusted earnings are now anticipated in the range of $12.80-$13.70 in 2018 compared with the previous projection $12.60-$13.70. The consensus mark for the metric in the current year was pegged at $13.28 per share.

Adjusted tax rate is now estimated at approximately 13.5%-14.5%, lower than the past range of 14-15%, reflecting the impact of the latest tax reform.

Hoping to achieve an improved cash position following the tax law, Amgen plans to invest approximately $750 million this year in capital expenditures.

Amgen Inc. Price, Consensus and EPS Surprise

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

Zacks Rank

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

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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 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.

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