3 Takeaways From Amgen's Earnings Report

Amgen (NASDAQ: AMGN  ) reported its quarterly earnings Tuesday, leaving us quite a lot to digest. After summing up what I was looking for in the company's financials and conference call, let's breakdown the essentials and see if Amgen's long-term goals are still achievable.

1. Growth of core products
This weekend, I highlighted the importance of Amgen's core products in providing stable cash flows to support its growth plans. In the third quarter, Amgen saw steady revenue growth of 10% year over year on a strong showing from blockbusters like Enbrel and Neulasta/Neupogen, and impressive growth from up-and-coming drugs XGEVA and Prolia. Enbrel sales grew 7% year over year, a respectable number for a product selling for more than $1 billion per quarter. Enbrel will only get more profitable in future quarters as Pfizer's revenue entitlements expire, relieving an estimated $800 million annual SG&A profit sharing expense.

Neulasta and Neupogen -- the white blood cell boosting drugs used to ease chemotherapy side effects -- saw sales growth of 18%, but don't be fooled by that number. The growth of the franchise was slightly inflated this quarter by a $155 million purchase of Neupogen by the government. Neulasta, the bigger revenue story of the two, increased in sales by 9% year over year. Those numbers should increase also, after Amgen purchased the rights to market Neulasta and Neupogen in international markets earlier in the day. Neupogen will be under threat from biosimilars next month, but Amgen's management fought off premature competition with a lawsuit against Teva.

2. It's only been 21 days...
That was the theme in discussions of the Onyx acquisition. Amgen's management seemed more than willing to let Onyx's development plans ride -- after all, that is why they bought the company. At the center of this development plan is multiple myeloma drug Kyprolis, which is currently approved as a third-line treatment. Management seemed optimistic about the progress of FOCUS and ASPIRE trials, which will provide support for Kyprolis registration as a second-line monotherapy and as a combination therapy with Celgene's Revlimid. Amgen will also continue the ENDEAVOR and CLARION trials, which pit Kyprolis head-to-head against Takeda's Velcade for top dog in the market.

3. PCSK9 update
While there wasn't much in the way of clinical trial updates, there was an implicit discussion of an FDA panel's decision not to recommend approval of Amarin's (NASDAQ: AMRN  ) Vascepa. The panel opted to wait for clinical evidence that lowering triglycerides provides improvement of cardiovascular outcomes. That decision applied strictly to hypertriglyceridemia and Vascepa, but there's some question whether cholesterol-lowering drugs will face the same scrutiny.

While Amgen and its competitor Regeneron are both undertaking clinical outcomes studies, the results of Merck's (NYSE: MRK  ) IMPROVE-IT study are due first. That trial will be the most robust test if additional LDL cholesterol reduction beyond underlying statin treatment has any clinical benefit. A negative result could spell trouble for the PCSK9 field, which is so exciting because of its ability to shrink LDL cholesterol on its own and with statins.

Bonus update: Biosimilars
With all of the PCSK9 hype, Amgen's biosimilars haven't had the spotlight they deserve. With a strong history of manufacturing biologics, Amgen is in a prime position to profit from the patent expiration of some top-selling biologic drugs, including Abbvie's Humira and Genentech's Herceptin. The Humira biosimilar is currently in a pivotal trial in patients with psoriasis, and could be a huge addition to Amgen's portfolio if all goes well.

The bottom line
As a shareholder myself, I'm certainly not disappointed in Amgen's progress. Amgen continued its top and bottom line growth, and is in line for an exciting 2014. There will be bumps in the road ahead, particularly with threats to the Neulasta/Neupogen patents and PCSK9 competition, but at these prices the company presents an interesting opportunity as both a growth and dividend value play. Keep an eye on the trials for Kyprolis and AMG145 that will define Amgen's future.

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