Amgen (AMGN) Q4 Earnings Top; Repatha Positive in CV Study

Biotech major Amgen Inc.AMGN reported fourth-quarter 2016 earnings of $2.89 per share, beating the Zacks Consensus Estimate of $2.77 by 4.3% and increasing 11% from the year-ago period. Higher revenues and operating margins drove the bottom line.

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Total revenue increased 8% to $5.97 billion in the fourth quarter of 2016, again beating the Zacks Consensus Estimate of $5.74 billion by 3.9% driven by higher product sales.

Quarter in Detail

Total product revenue rose 6% from the year-ago quarter to $5.66 billion (U.S.: $4.50 billion; ex-U.S.: $1.16 billion) as strong performance of Enbrel and Prolia as well as newer drugs like Repatha and Kyprolis was offset by lower sales of established brands like Epogen, Neulasta and Neupogen.

Revenues of Amgen's erythropoiesis-stimulating agent (ESA), Aranesp, grew 5% from the year-ago quarter to $526 million, reflecting higher unit demand in the U.S. given the shift in dialysis customer purchases from Epogen. Amgen does not expect much transition to Aranesp, going forward.

Revenues of the other ESA, Epogen, declined 8% to $316 million, reflecting a shift in dialysis customer purchases to Aranesp as well as the impact of competition. Amgen does not expect Epogen biosimilars in the U.S. until late 2017.

While Neulasta revenues declined 3% to $1.12 billion from the year-ago period due to lower unit demand, Neupogen recorded a 34% decline in sales ($173 million) due to biosimilar competition in the U.S. Zarxio, Sandoz's (Novartis AG's NVS generic arm)biosimilar version of Neupogen, was launched in the U.S. in Sep 2015.

However, the Neulasta Onpro kit (on-body injector) continues to perform well and ended 2016 with an approximate 50% share in the U.S. for all Neulasta sales.

Enbrel delivered revenues of $1.64 billion, up 14% from the year-ago quarter, as higher net selling price and favorable changes in the inventory level offset the impact of increased competition. On the call, management maintained that it expects minimal net price growth for Enbrel in 2017, which could hurt sales. Moreover, intense competition for Enbrel looms large. In Aug 2016, Sandoz received FDA approval for its biosimilar version of Enbrel, Erelzi. Notably, Erelzi is yet to be launched in the U.S. According to management, Enbrel volume trends in 2017 will be similar to 2016 levels.

Prolia revenues came in at $463 million, up 22% from the year-ago quarter due to higher demand. Prolia volume growth continued to improve as the company continues to capture share across U.S. and EU.

Meanwhile, Xgeva delivered revenues of $376 million, up 6% from the year-ago quarter mainly due to higher demand.

Sensipar/Mimpara revenues increased 7% to $411 million due to higher price.

Vectibix revenues came in at $143 million, up 6% driven by higher demand.

Kyprolis posted sales of $183 million, up 24% year over year, reflecting higher unit volume in both the U.S. and international markets.

Blincyto sales surged 32% from the year-ago period to $29 million, reflecting higher demand.

Repatha generated revenues of $58 million, up from $40 million in the third quarter.

Positive Data from Repatha Outcomes Study

Concurrently, Amgen announced that its PCSK9 inhibitor, Repatha, met the primary composite endpoint as well as the key secondary endpoints in a phase III cardiovascular outcomes study (FOURIER). The highly awaited top-line data from the study showed that Repatha was effective in reducing the risk of cardiovascular events (like cardiovascular death, non-fatal myocardial infarction (MI), non-fatal stroke and others) in patients with clinically evident atherosclerotic cardiovascular disease. Importantly, there was no new safety finding in the trial.

Uptake of Repatha, which gained FDA approval in Aug 2015, has not been very encouraging so far. However, the latest positive data, which clearly validates the outcomes benefit of PCSK9 inhibition in cardiovascular disease, should provide a material boost to Repatha.

Note that 2017 is proving to be a good year for Repatha. Last month, Amgen announced that the U.S. District Court in Delaware granted it permanent injunction against infringement by Sanofi SNY and Regeneron Pharmaceuticals, Inc. REGN for two patents owned by Amgen for Repatha. The decision bans Sanofi and Regeneron from selling Praluent during the term of the two patents, which describe and claim monoclonal antibodies of PCSK9. Praluent's ban could in turn drive sales of Repatha.

Operating Margins Increase

R&D expenses were flat in the quarter, while SG&A spend declined 4% due to the Oct 2016 expiration of Enbrel residual royalty payments.

Adjusted operating margins rose 610 basis points (bps) to 50.5% due to higher revenues and lower operating costs, reflecting continued benefits from transformation and process improvement efforts.

Amgen bought back shares worth $1 billion in the quarter. At the end of 2016, Amgen had $4.1 billion remaining under its $5 billion stock repurchase plan.

2016 Results

Full-year sales improved 6% to $22.9 billion, beating the Zacks Consensus Estimate of $22.76 billion. Revenues were also slightly above management's guided range of $22.6-$22.8 billion.

Adjusted earnings came in at $11.65 per share, up 12% year over year, and surpassed the Zacks Consensus Estimate of $11.53. Earnings were also above the projected range of $11.40 to $11.55.

2017 Guidance

The company expects total revenue in the range of $22.3 billion to $23.1 billion and earnings of $11.80 to $12.60 per share in 2017. The Zacks Consensus Estimate for earnings is pegged at $12.27. However, the sales guidance fell slightly short of the Zacks Consensus Estimate of $23.41 billion.

Foreign exchange headwinds are expected to have an unfavorable impact of approximately 1% on top-line growth and 20 cents on adjusted EPS.

Our Take

Amgen surpassed expectations yet again. However, the 2017 sales outlook was somewhat unimpressive. However, shares gained 2.5% in after-market trading courtesy of the positive results from the Repatha cardiovascular outcomes trial. So far this year, Amgen's shares were up 13.4%, better than the 4.1% increase registered by the Zacks classified Biomed/Genetics industry.

While the company faces its own share of headwinds such as biosimilar competition and slowdown in mature products, contribution from new product launches should be meaningful and provide a boost. The company's restructuring plan should streamline it and increase cost efficiency. Amgen is also progressing with its pipeline given quite a few regulatory and data updates scheduled for the coming quarters. This month, the FDA is expected to give its decision on Parsabiv for the treatment of secondary hyperparathyroidism in adults with chronic kidney disease on hemodialysis.

Amgen Inc. Price, Consensus and EPS Surprise

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

Amgen currently 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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