In the third quarter, Amgen Inc. (NASDAQ:AMGN) continued to manage the decline of its top two products with an interesting mixture of innovation and arithmetic. Even though operations produced a much lower profit, huge buybacks during the three months ending in September, and earlier this year, allowed earnings per share to keep moving in the right direction.
Amgen Inc. results: The raw numbers
|Metric||Q3 2018||Q3 2017||Year-Over-Year Change|
|Revenue||$5.9 billion||$5.77 billion||2%|
|Income from operations||$2.32 billion||$2.44 billion||(5%)|
|Earnings per share||$2.86||$2.76||4%|
What happened with Amgen Inc. this quarter?
Sales of the company's top two drugs, Neulasta and Enbrel, fell 5% and 6%, respectively, compared with the previous year. Luckily, Amgen has several recently launched drugs growing fast enough to offset most of the losses.
- Sales of denosumab, Amgen's blockbuster bone density drug, rose 13% to $965 million in the third quarter.
- Aimovig, a next-generation migraine prevention therapy with blockbuster expectations, finished the third quarter with 100,000 patients on treatment. As Aimovig is the first of three drugs of the same class to earn approval this year, Amgen has been offering temporary discounts to maintain a leading share of the burgeoning U.S. market. As a result, sales of the Novartis (NYSE:NVS) partnered treatment only reached $22 million during its first full quarter on the market.
- Huge Repatha rebates helped sales of the cholesterol-reducing injection rise 30% to $120 million through increased volume. More recently, Amgen slashed the list price that patient co-pays are often based on, but we still don't know how much of a difference this will make to the net price Amgen receives for the drug.
- Sales of multiple myeloma treatment Kyprolis rose 12% to $232 million. In October, the FDA approved a once-weekly dosing option that could give sales a boost going forward.
- Sales of the company's first bi-specific antibody, Blincyto, climbed 12% to $58 million. In September the company earned approval to treat leukemia patients in Japan with the treatment.
Amgen also returned an impressive $1.7 billion to shareholders in the form of share repurchases. Although the company reported a 5% operating income reduction, massive share repurchases that have lowered the outstanding share count around 10.4% in 2018 allowed the company to report a 4% earnings gain on a per-share basis. Fewer shares will also make it a lot easier to keep making dividend payments as Neulasta and Enbrel continue losing ground to biosimilar competition.
What management had to say
Robert A. Bradway, Amgen's CEO, was more than encouraged by the recent performance of younger drugs, including those without significant sales yet.
We are in the early stages of launching several new products that offer innovative solutions for patients suffering from serious diseases. Our newer products continue to deliver strong growth in unit volumes.
Investors will want to pay closer attention to total prescription data for Aimovig before they look too closely at early sales. Enough patients have already started Aimovig to drive annual sales past $500 million if they stay on treatment.
Despite a somewhat mixed quarter, Amgen raised forecasts for the year. Instead of total revenue in a range between $22.5 billion and $23.2 billion, the company now expects between $23.2 billion and $23.5 billion. The company also raised its outlook for adjusted earnings per share to somewhere between $14 and $14.25 per share from a previous range of $13.30 and $14 per share.
While Amgen's late-stage pipeline isn't winning any awards, the company did initiate clinical trials with seven first-in-class new cancer drug candidates during the third quarter alone. Later this year, the company will present early data from AMG 420 and AMG 330 that could go a long way to change how analysts feel about the company's future.