Amgen Misses but Guides Higher - Analyst Blog

Amgen (AMGN) reported fourth quarter earnings per share of $1.03, well below the Zacks Consensus Estimate of $1.11 and a cent below the year-ago earnings of $1.04. Full year earnings came in at $4.83, 8 cents below the Zacks Consensus Estimate but 7.8% above the year-ago earnings of $4.48. 

While fourth quarter total revenues increased 2% to $3,809 million, revenues for the full year declined 2% to $14.6 billion. 

Total product revenues increased 2% to $3,743 million in the reported quarter. While revenues in the U.S. declined 1% to $2,882 million, international revenues increased 11% to $861 million mainly due to the favorable impact of foreign exchange (Fx) fluctuation, which boosted revenues by approximately $35 million. 

For the full year, total product revenues declined 2% to $14.4 billion. While U.S. revenues declined 3% to $11.1 billion, international revenues remained relatively unchanged at $3,216 million. Fx fluctuation negatively impacted full year revenues by $213 million. 

Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp continued to decline with fourth quarter sales coming in at $648 million, down 8% (U.S. - $288 million, down 20%; ex-U.S. - $360 million, up 4%), mainly due to a decline in demand reflecting the negative impact, primarily in the supportive cancer care setting, of additional product label changes which occurred in August 2008 and a decrease in average net sales price. For the full year, Aranesp revenues declined 15% to $2,652 million, mainly due to the decline in U.S. demand. 

Aranesp revenues could decline further in 2010 following the implementation of a Risk Evaluation and Mitigation Strategy (REMS) for the product, potentially in the first half of 2010. 

Meanwhile, fourth quarter revenues of Amgen’s other ESA Epogen increased 9% to $703 million reflecting an increase in demand, which was supported by patient growth, increased dose utilization, and an increase in average net sales price. For the full year, Epogen revenues increased 5% to $2,569 million. 

Worldwide revenues of Neulasta and Neupogen increased 2% to $1,202 million in the fourth quarter, driven by increased demand for Neulasta. U.S. revenues remained relatively unchanged at $880 million. International revenues increased 9% to $322 million, mainly due to increased demand driven by conversion of Neupogen to Neulasta, expansion into new territories, and favorable Fx impact of $12 million. For the full year, Neulasta and Neupogen revenues remained relatively unchanged at $4,643 million. 

Enbrel revenues in the reported quarter were relatively unchanged at $912 million. Increased competition in the dermatology market continued to affect the product’s performance with full year revenues declining 3% to $3,493 million. 

Sensipar revenues increased 12% to $171 million in the reported quarter mainly due to increased international demand. Revenues for the full year increased 9% to $651 million. Recent launches of Vectibix in Europe helped drive Vectibix revenues to $66 million during the quarter. This was partially offset by lower revenues in the U.S. Full year Vectibix revenues increased 52% to $233 million. Label expansion into second and first-line metastatic colorectal cancer should help drive Vectibix’s future growth. 

While cost of goods sold declined during the reported quarter, both R&D and SG&A expenses increased. For the full year, R&D expenses declined due to lower clinical trial costs primarily for denosumab and Vectibix registrational studies and lower staff related costs. Cost of goods sold also declined for the full year. However, SG&A spend increased primarily due to increased spending for activities in preparation and anticipation of approval and launch of Prolia and increased promotional expenses for marketed products. 

Amgen provided financial guidance for 2010. Amgen expects earnings per share in the range of $5.05 to $5.25 on revenues of $15.1 to $15.5 billion. This is above the current Zacks Consensus Estimate of $5.02. 

2010 should be a catalyst-filled year for Amgen. We expect investor focus to remain on the potential approval and launch of Prolia (denosumab), which received a complete response letter from the U.S. Food and Drug Administration (FDA) in 2009. Amgen announced that it has submitted the information requested by the FDA for the postmenopausal osteoporosis (PMO) indication. 

Amgen expects to present data on Prolia from the prostate skeletal related events (SREs) study (‘103) in the first quarter of 2010. Amgen is looking to seek approval for the treatment of SREs in advanced cancer patients later this year. Data from a phase III metastasis prevention study in prostate cancer (‘147) should be out in the second half of 2010. 

With all its key products slated to lose patent protection in the next few years, Amgen has a lot riding on the timely approval of Prolia. Any hiccup, either with respect to further delays at the FDA, a miss in any of the other ongoing phase III programs, or safety concerns post-launch, will weigh heavily on the shares. We currently have a Neutral recommendation on Amgen.
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