Amgen Lets the Good Times Roll

Earnings season struck the markets with a bang this week, and shares of some of the largest companies in the world have been sent reeling. A few key reports of strength have managed to stave off some of the worst quarterly data, however -- and while the health care field has been hit-or-miss so far, major biotech player Amgen (Nasdaq: AMGN  ) had a chance on Tuesday to belt out a home run for its shareholders. I'll show you three key takeaways from the report clearing up Amgen's future, but first, let's see how its quarter stacked up against expectations.

Did Amgen make the cut?
The third quarter in 2011 hadn't been kind to Amgen, when a legal reserve charge had laid a heavy damper on the results. The company had a lot to match on a quarterly basis, however, given that Amgen crushed analyst expectations in a great second-quarter report. Fortunately, the third quarter continued the company's good fortune.

For Amgen CEO Robert Bradway's first complete quarter  with the company, he sure put up some good results. Amgen's adjusted earnings per share of $1.67 absolutely slaughtered projections by $0.20. 

Amgen further beat estimates on  revenue, posting a 10% leap to $4.32 billion. The good news prompted the company to raise its expectations for full-year revenue to between $17.2 billion and $17.3 billion, up from between $16.9 billion to $17.2 billion. The company also raised EPS forecasts.

It all came together for Amgen this quarter, continuing the great 2012 the company has had so far. Shares rose more than 1% in after-hours trading, but with the stock near 52-week highs, is there still an opportunity here for investors late to the game? Let's check out just how Amgen succeeded in the third quarter to find out what's in store.

3 keys behind the data
Amgen's multi-decade blockbuster anemia drug Epogen managed to squeak out gains this quarter despite the ongoing passage of time. This ancient drug has scored massive sales for the company, but fresh competition from Affymax (Nasdaq: AFFY  ) and its own FDA-approved anemia drug, Omontys, has placed the heat on Amgen recently. It's a testament to Amgen's fortitude in defending its turf that the company still manages to wring gains out of Epogen, which picked up sales growth of 3% for the quarter.

Epogen's patents may expire between 2013 and 2015, but Amgen has managed to establish a fence around its best-seller that should keep the drug in business for quite some time. The company's deal with major dialysis chain DaVita (NYSE: DVA  ) to supply 90% of the latter's medication with Epogen undoubtedly will hurt Affymax's gains in the competition. Still, you should keep your eyes open for the latest in the anemia and dialysis front, as Omontys sports the benefit of only requiring once-monthly dosages for patient convenience, rather than the more frequent administration of Epogen. Generic drugmaker Hospira (NYSE: HSP  ) also began a phase 3 trial of a biosimilar drug to Epogen back in January, and investors should keep an eye out for the trial's results sometime next year.

In less optimistic news, Amgen's biggest sellers, cancer-fighting Neulasta and Neupogen, only managed to gain 1% sales growth for the quarter. Neupogen and Neulasta face some serious competition given that the drugs go off-patent in 2013 and 2015, respectively, and already battle the likes of Teva Pharmaceutical's (NYSE: TEVA  ) Tevagrastim and Hospira's Nivestim outside of the U.S. -- the latter of which is already a biosimilar of Neupogen. Unfortunately, it looks like the company could struggle with its bestseller in coming years, given that sales growth for Neulasta and Neupogen had already been slowing.

Fortunately, a third, sparkling piece of optimism from the quarter restored hope. Sales of rheumatoid arthritis drug Enbrel zoomed up 17% for the quarter, beating analyst expectations in counting sales of $1.08 billion. Enbrel picked up 11% year-over-year growth in Q2, so the increased growth looks good for the future. Amgen also received some patent news for the drug last year – increasing its patent protection another 16 years after the drug had been scheduled to go off-patent this year.

That's great news for Enbrel, which already ranked as Amgen's second-best seller in 2011. While Enbrel faces competition from Merck (NYSE: MRK  ) abroad in the rheumatoid arthritis market, more than half of Enbrel's sales come domestically -- where the patent will help to protect the company's swelling gains. Given that Pfizer (NYSE: PFE  ) markets and sells the drug outside the U.S., shareholders should feel confident about this drug's future success and current growth, particularly with the numbers posted this quarter.

Time to take the plunge?
Given recent health care earnings reports that haven't elicited excitement, Amgen's third quarter should spark your confidence in this stock. With a large pipeline and modest dividend, the biotech star offers enough promise to outweigh concerns over looming patent expirations. The solid earnings report should only reinforce Wall Street optimism around this biotech star.

While you can certainly make huge gains in biotechs, as exemplified in Amgen's rise to stardom, the best investing approach is always to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Fool contributor Dan Carroll has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.


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