Amgen (AMGN) reported third quarter 2014 earnings of $2.30 per share, well above the Zacks Consensus Estimate of $2.06 and the year-ago earnings of $1.93. Earnings were driven by higher revenues and higher profitability on Enbrel.
Total revenues increased 6% to $5,031 million in the third quarter of 2014, beating the Zacks Consensus Estimate of $4,918 million.
Including one-time items, third quarter earnings declined 10% to $1.61 per share.
The Quarter in Detail
Third quarter total product revenues increased 4% from the year-ago quarter to $4,848 million (U.S.: $3,682 million, ex-U.S.: $1,166 million) with products like Kyprolis, Neulasta, Prolia and Xgeva driving growth. Unit demand was mainly responsible for growth with price also contributing to the same.
Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp grew 6% from the year-ago quarter to $474 million (U.S.: $188 million; ex-U.S.: $286 million) reflecting unit demand in ex-U.S. markets.
Revenues of Amgen’s other ESA, Epogen, grew 5% to $518 million. Amgen reported stable unit demand.
Worldwide revenues of Neulasta and Neupogen decreased 7% to $1,493 million in the third quarter. While Neulasta revenues grew 5% from the year-ago period, Neupogen recorded a 36% decline in revenues reflecting unfavorable year-over-year comparisons. Amgen had recorded a $155 million order for Neupogen from the U.S. government in the year-ago quarter.
Enbrel delivered revenues of $1,120 million, down 3% from the year-ago quarter due to unfavorable changes in inventory. There was an inventory build of about $60 million in the second quarter of 2014. Amgen said that Enbrel units grew 3% from the year-ago period and 5% sequentially. 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.
Third quarter 2014 Prolia revenues came in at $255 million, up 43% 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 third quarter 2014 revenues of $318 million, up 22% from the year-ago quarter due to higher demand. Xgeva continues to gain share in the market despite the presence of generic versions of Novartis’ (NVS) Zometa in the market.
Sensipar/Mimpara revenues increased 5% from the year-ago quarter to $273 million due to higher demand. Vectibix revenues came in at $138 million during the quarter, up 29% from the year-ago quarter. Vectibix sales benefited from a stronger label in the U.S. (first-line treatment in combination with Folfox in patients with wild-type KRAS metastatic colorectal cancer) and growth in the EU.
Kyprolis, an Onyx product, posted sales of $94 million, up 20.5% sequentially on higher unit demand.
While third quarter 2014 R&D expenses increased 1.2% from the year-ago period, SG&A expenses declined 15.6%. The end of the Enbrel profit share arrangement with Pfizer (PFE) contributed to lower SG&A spend.
Amgen continues to progress with its pipeline. The company is currently seeking marketing approval for evolocumab (cholesterol management), ivabradine (chronic heart failure), blinatumomab and T-Vec (both for cancer).
Ups 2014 Guidance Again
Amgen raised its guidance for 2014 yet again. The company now expects to earn $8.45 – $8.55 per share on total revenues of $19.8 billion – $20 billion. Earlier this year, the company had guided towards earnings of $8.20 – $8.40 per share on total revenues of $19.5 billion – $19.7 billion. The Zacks Consensus Estimate for earnings and revenues are below the guidance range at $8.24 per share and $19.6 billion, respectively.
Our Take
Amgen’s third quarter results were strong 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 is exploring other efficiency initiatives as well. We expect further updates at the company’s upcoming business review meeting.
Amgen was recently encouraged by a hedge fund to consider splitting into two companies – one with a focus on cash-generative mature products and the other on R&D-intensive growth products. Amgen’s views on a potential breakup will most likely be a focus area at the business review meeting.
Amgen is a Zacks Rank #3 (Hold) stock. Biogen (BIIB) is a better-ranked stock in the biotech sector with a Zacks Rank #1 (Strong Buy).
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