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What happened

After Amgen, Inc. (NASDAQ:AMGN) sounded a cautionary alarm regarding drug prices during its third-quarter earnings, shares in the company fell 15.4% in October, according to S&P Global Market Intelligence.

So what

Amgen put up solid top and bottom line in the third quarter. However, it may face difficulties in delivering future growth, based on management's comments during a conference call with investors.

The company reported sales of $5.8 billion, up 1.6% year over year, and earnings per share, or EPS, of $3.02, up 11% year over year, in the third quarter. Sales were $80 million above industry watchers' predictions and EPS beat analysts' forecast by $0.23, but despite the beat, shares tumbled after management indicated to investors that it doesn't expect to realize gains from a price increase on its best-selling Enbrel next year. Apparently, insurers are requiring higher rebates for Enbrel for it to remain in a preferred position in their drug formularies. The drugmaker's executive vice president for global commercial operations, Anthony Hooper, provided more details:

In highly competitive markets, PBMs can require incremental rebates from us in order for us to maintain our formulary positioning. Maintaining our formulary positioning is essential to ensure patients have access to a drug like ENBREL, which has the longest in-market history of efficacy and safety. Given this dynamic and present contract negotiations, we expect relatively little benefit from net selling price changes in 2017.

Now what

The lack of pricing power is bad news for the biotech giant because Enbrel's markets have become increasingly competitive, and that's weighing down unit volume. In Q3, Enbrel volumes were 7% lower than a year ago. The risk of volume loss and flat-lining prices is important because Enbrel sales were $1.45 billion in the third quarter, making it Amgen's top-selling drug.

However, investors may not want to dismiss Amgen altogether on this news. 

The company's earnings are growing more quickly than its sales thanks to a cost restructuring, and there are some bright spots in its product portfolio and pipeline.

For example, the company's Prolia, Kyprolis, and Repatha saw rapid sales growth last quarter versus a year ago. Prolia sales rose 18%, to $379 million; Kyprolis sales rose 34%, to $183 million; and Repatha sales jumped to $40 million from $3 million last year. In addition, the company's got a slate of biosimilars in the works, including one for Humira, and a cardiovascular outcomes study is expected to read out data early next year. If that study is positive, it could significantly boost Repatha sales.

Overall, however, Amgen appears to be in a period of transition. Its blockbusters Epogen and Neupogen are seeing sales drop because of recently launched competing biosimilars, and a lid on drug prices doesn't offer a lot of support to its top-line growth next year. Therefore, while the company's 3% dividend yield is enticing, a wait-and-see approach might be better than rushing in to buy following last month's drop.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.