Source: Amgen via Flickr.

Things have really come together nicely for biotech blue-chip stock Amgen (AMGN 2.35%) over the last couple of years. Following a decade where its share price had essentially gone nowhere despite aggressive share buybacks, the company's plan to report data on 10 late-stage products between 2014 and 2016 really seems to be driving a lot of excitement.

Amgen is already beginning to see the fruits of its spoils. In December, the Food and Drug Administration approved Amgen's immunotherapy product, Blincyto, to treat a rare form of acute lymphoblastic leukemia. Just four months later, the FDA would come back with its second approval of an Amgen drug by green-lighting Corlanor, a drug designed to lower the hospitalization risk for patients with chronic heart failure.

Both of these approvals were big firsts for Amgen, as it signified Amgen's first immunotherapy approval and its first step into the cardiovascular field. Meanwhile, Amgen also chalked up a win in Europe when it recently received approval for its next-generation cholesterol-lowering drug Repatha.

Amgen earnings take center stage
But another exciting catalyst stands just around the corner for Amgen: the release of its second-quarter earnings results. Per Amgen, those results are slated to be released after the closing bell on Thursday, July 30, 2015.


Source: Pictures of Money via Flickr.

What's Wall Street expecting? According to a quick look at the consensus estimates, the Street anticipates Amgen to deliver $5.32 billion in revenue and $2.42 per share in EPS. Compared to last year, this represents sales growth of just shy of 3%, and EPS growth of roughly 2%.

The odds are certainly favoring a substantial earnings beat, at least based on Amgen's recent earnings history. Out of the past 11 quarters, Amgen has missed Wall Street's EPS estimates just once. During the quarters where it has beaten them, nine out of its 10 "beats" were of $0.11 per share or higher. In other words, when Amgen surprises Wall Street, it does so in a big way.

Three questions we want answers to
But top- and bottom-line figures only tell us one part of the story. What they don't tell us is how a company arrived at its sales and profit figure. To understand that, we have to be willing to dig a bit below the surface and ask the important questions. I believe these are three questions all Amgen shareholders and interested investors should be asking prior to Amgen's second-quarter report.

1. Are new therapies helping to offset weakness in mature products?
I don't want to make it seem as if there aren't multiple drugs worth following in Amgen's product portfolio, but there are a few that investors are clearly more interested in than others here in Q2. Specifically, investors are going to want to pay attention to the give-and-take between Amgen's mature products, which are seeing slowing or declining growth prospects and its newly approved therapies that are being expected to pick up the slack.

For instance, Amgen's mature products, such as Neulasta/Neupogen, a white blood cell enhancer for chemotherapy patients, and Enbrel, an arthritis drug, are at that point in the cycle where they've plateaued. Neupogen sales are being exposed to generic competition, and Enbrel lost five percentage points in market share in dermatology on a year-over-year basis due to competition in the first quarter. The only thing saving Enbrel from a truly disappointing year-over-year performance was a 19% price hike.

Source: Amgen.

By comparison, osteoporosis drugs Xgeva and Prolia and multiple myeloma drug Kyprolis grew by 22%, 39%, and 59%, respectively, on a year-over-year basis. Wall Street and investors will be eagerly looking for demand from these new therapies to help offset volume weakness in more mature medicines.

Kyprolis' sales are especially important since its peak sales potential will ultimately determine whether Amgen overpaid for Onyx Pharmaceuticals. Having delivered $108 million in sales in Q1, I would personally look for Kyprolis to deliver in the neighborhood of $115 million to $120 million in sales in Q2. It has a decent shot at surpassing $500 million in sales this year, in my opinion. 

2. Are cost reductions working their way to the bottom line yet?
Secondly, investors should be curious about Amgen's cost-saving actions and whether they're translating into healthier profits or margins.

As a refresher, Amgen announced two separate layoffs last year totaling around 20% of its workforce -- or 4,000 jobs. The reason behind the layoffs was simple: Amgen needs to save money. It's not as if it is in dire straits or anything, but the cost of running so many late-stage studies, applying for new drug applications, and marketing/launching new therapies add up. In order to support its generous shareholder perks, including a 2% dividend yield (which has grown mighty fast over the past three years) and copious share buybacks, Amgen decided the best course of action was to trim the fat in the workplace, so to speak.

Source: Federal Reserve Bank of NY via Facebook.

Amgen's initial layoff announcement of 2,900 workers was designed to save the company $700 million per year. Inclusive of its second announced round of layoffs, the total savings in a few years may total close to $1 billion. With these savings, it's possible that Amgen could push its operating margin above 50%, but it could be a few years before this is a reality.

The big question we'll want answered is to what extent these cost cuts are helping Amgen's margins in 2015 and what we might expect in terms of operating margin expansion in 2016. I expect management to face a number of questions on operating margins during the conference call if it's not addressed in the press release.

3. What data releases are on tap for the second half of 2015?
Lastly, Wall Street and investors are going to want some color on the state of Amgen's late-stage development pipeline.


Source: Amgen via Flickr.

Thus far, most of Amgen's late-stage studies have produced positive results and things have generally remained on track, but it hasn't been flawless. Cancer immunotherapy talimogene laherparepvec, better known as T-Vec, had its PDUFA action date pushed back three months from July 28, 2015, to October 27, 2015, in order for Amgen to submit additional information and the FDA's panel, while supportive of an approval, questioned the design of one of T-Vec's studies as well as its effect on patients' overall survival.

To that end, investors are also itching for an update on Amgen's biosimilar program, where it's creating rival drugs for cancer drug Avastin and anti-inflammatory drug Humira (currently the best-selling drug in the world). Biosimilars could become a key part of Amgen's growth in the second half of this decade, and investors are certainly eager to hear more about Amgen's progress in this area.

Here's what you should be doing
Now for my truly groundbreaking suggestion: With Amgen slated to report earnings, you should do (drumroll)... absolutely nothing. If your investment thesis suggests Amgen can head higher, then there's no reason for you to dump your shares now. Likewise, if you believe Amgen's shares have overstepped their bounds in recent years, you should probably stick to the sidelines.

It's important to not let a single earnings report trip up your investment thesis if the longer-term view of that thesis is still intact. I've seen nothing to suggest that Amgen's business model is in any jeopardy or that its profit outlook is set to face big changes in the coming years. This doesn't mean Amgen may not be volatile come July 30, but it does mean that you should avoid making a hasty trade based on emotions.