Amgen Reports Strong Numbers, But Better Days May Be Coming

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Biotech giant Amgen (NASDAQ: AMGN  )  recently reported sales growth of 10% in the third quarter as it racked up sales of $4.7 billion thanks to growth from new drugs Xgeva and Prolia.

The company gained approval for denosumab, sold as Prolia and Xgeva, back in June 2010 for the treatment of osteoporosis. Since then, its label has expanded to include the prevention of bone metastases from solid tumors, to bulk up bone in patients being treated with androgen deprivation therapy for prostate cancer or aromataseinhibitors for breast cancer, and this past June for treating giant cell bone tumors.

As a result of this label growth, Amgen sold 41% more Prolia and Xgeva in the third quarter than the same time a year ago, generating $439 million in revenue in the quarter. The fastest growth came from Xgeva, which grew 62% to $178 million thanks the additional indication approved in June.

Amgen also benefited from buying the rights it previously hadn't owned for Neulasta and Neupogen from Roche, two drugs with combined sales of $1.3 billion in the quarter.

New deals in Asia offer future growth
The quarter was strong, but future growth is likely to be better thanks to its deals inked this year to commercialize its colorectal cancer drug Vectibix in China. Sales of Vectibix reached $107 million in Q3, up 22% from a year ago. And, the commercialization agreement with Zhejiang Beta Pharma provides significant opportunity since Beta operates the biggest oncology sales force in China. The partnership provides an opportunity to ramp Vectibix sales ahead of U.S. patent expiration in 2017 and European expiration in 2018.

Amgen also cut a deal this summer with Astellas that will help advance key late stage drugs like AMG 145 -- a cholesterol-lowering drug with potential blockbuster revenue currently in phase 3 trials -- in Japan. The co-development and commercialization deal with Astellas also covers AMG 785 for osteoporosis and AMG 102 for gastric cancer, both of which are in global phase 3 trials, as well astwo additional drug candidates currently in phase 1.

Arguably, the most intriguing is AMG 145 given recent data released from competitors Sanofi (NYSE: SNY  ) and Regeneron (NASDAQ: REGN  ) showed success for their alirocumbab this month. Sanofi and Regeneron's drug, which like AMG 145 is a PCSK9 protein inhibitor, reported 94% of patients receiving the highest dose of the drug in phase 3 trials saw LDL fall. That data reinforces Amgen's phase 2 data, which showed the average AMG 145 patient saw LDL fall by 40% to 59% versus just 0.1% to 0.5% for placebo. Amgen expects to report phase 3 data in the first quarter of 2014.

Amgen's game-changing acquisition
While partnerships to expand sales in Asia offer opportunity, the biggest upside may come from Amgen's recent $10.4 billion acquisition of cancer drug developer Onyx Pharmaceuticals. That deal closed on Oct. 1 following a multimonth back-and-forth over pricing. The final $10 billion price tag negotiated by former investment banker Amgen CEO Robert Bradway may prove cheap.

Onyx, whose sales grew 110% to $153 million in the second quarter, added three already commercialized drugs to Amgen's product line, including its high-profile multiple myeloma drug Kyprolis. Analysts think Kyprolis, approved in July 2012, may someday top $3 billion a year in peak sales as its label expands across other cancer indications. In the third quarter, sales of the drug grew 6% from the second quarter to $65 million, thanks to increased market penetration and its average treatment cycle cost of near $40,000.

Amgen hopes a current trial of Kyprolis as a second line treatment and another trial as a first line treatment for the disease can significantly boost future earnings.

The deal also gave Amgen Onyx's rights to Nexavar, which was developed with Onyx's partner Bayer. That drug generated $82 million in revenue for Onyx in the second quarter. Bayer also pays a 20% royalty to Onyx for the drug Stivarga, which contributed $10 million in sales in the second quarter. Those two drugs may offer growth as their labels expand, too. Nexavar was fast tracked by the FDA as a thyroid cancer treatment in August, and the FDA added the indication GIST to Stivarga's label earlier this year.

Fool's final take
Amgen's 10% growth is solid on its own, but given the likely competition in an increasingly competitive market for autoimmune diseases like psoriasis, sales of Enbrel -- which totaled $1.1 billion in the third quarter -- will increasingly be pressured. That increases the stakes for expanding Amgen's pipeline with drugs like AMG 145, increasing its commercialized drug reach into new markets and capitalizing on Onyx's oncology franchise. If Amgen can execute on those three missions, you may find that its best days are ahead.

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