Amgen Earnings: Beyond the Numbers

Amgen (NASDAQ: AMGN  ) reported its quarterly results after the market closed on Wednesday. Shares were little changed in early trading on Thursday after the company announced earnings slightly below consensus analyst estimates. Let's dig into Amgen's numbers and go beyond them to see how 2013 is shaping up for this biotech.

The numbers
Diluted earnings per share for the fourth quarter came in at $1.01, down 6% from the same period in 2011. For the full year, earnings per share jumped 37% versus the prior year.  That comparison was helped greatly, though, by a charge in 2011 for a legal settlement reserve and by share buybacks. Amgen's adjusted net income for 2012 was up only 5% compared to the prior year.

Revenue in the fourth quarter came in at $4.4 billion, beating analyst estimates of $4.3 billion. Full-year revenue totaled $17.3 billion, with product sales comprising $16.6 billion of that amount. Both quarterly and full-year revenue came in 11% higher than the 2011 figures.

Amgen announced 2013 guidance for adjusted earnings per share of $6.85 to $7.15. The company also projected revenue of $17.8 billion to $18.2 billion. Both ranges topped the consensus analyst estimates. 

Beyond the numbers
Amgen's biggest revenue-generator, the Neulasta/Neupogen franchise, grew sales in 2012 but only by 3%. Neulasta/Neupogen sales in the fourth quarter decreased 1% compared to the same period in the prior year.

Looking back at the third quarter, the drugs were rapidly losing market share outside of the U.S. due to competition from biosimilars, particularly Zarzio from Novartis and Hospira's Nivestim. That situation will extend to the U.S. soon with Amgen losing patent exclusivity for Neupogen at the end of 2013. Under a previous agreement, Teva (NYSE: TEVA  ) can launch its biosimilar product, Neutroval, in the U.S. in November of this year. Expect further sales declines as Teva, Novartis, Hospira and possibly others move to bring their biosimilars to the American market.

The story for Enbrel looks more encouraging. Sales for the anti-inflammatory drug grew 14% for the full year and 23% during fourth quarter. Those numbers compare favorably to AbbVie's  (NYSE: ABBV  ) Humira, which saw increased sales of 23% and 17% for the full year and fourth quarter, respectively. Unlike AbbVie, which must deal with the loss of Humira's U.S. patent at the end of 2016, Amgen could enjoy many more years of patent protection for Enbrel thanks to a new patent won in 2011. 

Anemia drugs Aranesp and Epogen both saw sales decline for 2012 and in the last quarter. Aranesp sales fell 11% for the year and 9% in the fourth quarter. Sales for Epogen were down 5% for the year but only 1% in the fourth quarter. Affymax (NASDAQOTH: AFFY  ) , which received FDA approval in early 2012 for its anemia drug Omontys, doesn't appear to have made significant inroads in the market yet. Amgen stated that the "impact of competition appears to be modest" in a passing reference to Affymax's entrance into the fray.

Perhaps the best news for Amgen stems from its second tier of drugs. Sensipar/Mimpara, Vectibix, NPlate, Xgeva, and Prolia all saw strong growth during the fourth quarter and the full year. Their combined revenue for the year totaled $2.9 billion. The Sensipar/Mimpara franchise should surpass $1 billion in sales this year, especially with good news from the fiscal cliff deal struck in Washington that keeps Sensipar out of end-stage renal disease bundling through 2016.

Looking ahead
Look for possible catalysts down the road from a couple of pipeline products. Amgen's experimental cholesterol drug AMG145 is now in a phase 3 study. The company also restarted enrollment for a phase 3 study of trebananib in the treatment of ovarian cancer. This trial was put on hold for a while due to low supplies of Doxil.

A wild card for Amgen is its recent acquisition of deCODE Genetics.  It should be interesting to see how the purchase of this Iceland-based genetic research company plays into Amgen's research and development going forward.

Last but not least, investors can expect Amgen to keep on juicing its dividends. The company increased the dividend payment by 31% for 2013, bringing the yield to 2.3%. Management indicated in the earnings conference call that share repurchases would taper off as more focus is placed on boosting dividends.

Although Amgen faces some headwinds from mounting competition, the company's near-term future appears to be pretty solid. Its better-than-expected guidance bolsters that optimism. While Amgen's 2012 numbers were good, they weren't great. However, looking beyond the numbers gives plenty of reasons to anticipate an even better year in 2013 for this biotech. 

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