Please ensure Javascript is enabled for purposes of website accessibility

Should Investors Worry About Amgen After Its Q1 Update?

By Keith Speights and Brian Orelli, PhD – May 5, 2021 at 7:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There are certainly some problem spots for the big biotech.

Amgen (AMGN -0.67%) reported its first-quarter results on April 27, 2021. Those results weren't very impressive. In this Motley Fool Live video, recorded on April 28, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not investors should worry after the biotech's Q1 update.

Keith Speights: Let's switch gears and talk about some earnings. One of the biggest biotechs in the world, Amgen, reported its first-quarter earnings on Tuesday. Brian, I know you've taken a look at Amgen's results. Were there anything for investors to worry about with the company's update?

Brian Orelli: Yeah. The company is really dealing with two main issues. One is that people aren't necessarily still going to their doctor for things that aren't life-threatening, and so then that's causing slightly lower volumes for those drugs.

But it's also having to discount a lot of its drugs. For instance, its migraine treatment, Aimovig, grew 20 percent in volume, but recorded 7 percent lower revenue because had discounted the drug so much.

It's sticking with 2021 revenue and adjusted earnings guidance. So the company thinks it will pick up in the second half as more people will get vaccinated and feel more comfortable going back to their doctor.

They upped the high end of the guidance for share repurchases, so they could buy back as much as $5 billion in stock this year. So I think they're trying to prop up their earnings per share by reducing the number of shares in the denominator.

Speights: I was looking at Amgen's earnings yesterday, and I noticed of the company's top five best-selling drugs, four of them saw sales declines, year-over-year sales declines. I guess the worst too was the company's No. 1 and No. 2 drugs. Enbrel saw sales drop 20 percent year over year, Neulasta saw sales drop 21 percent year over year as it faces biosimilar competition.

There was one, I guess, asterisk in there. Otezla, which is an autoimmune disease drug that Amgen bought to help grease the wheels for the Bristol Myers Squibb acquisition of Celgene last year. Otezla saw sales drop about 1 percent, but that was mainly because of rebates.

That's probably just a temporary deal, and I suspect we'll see Otezla return to solid growth going forward. But still four out of five drugs experiencing sales declines out of the top five, not a good story, right?

Orelli: Yeah, No. That's never a good thing when your top-selling drugs have stopped growing or even started to decline. That makes it hard even when you add new drugs because they're going to be so much smaller when they begin that when you add these new drugs and ramp up sales there, you can sometimes not even be able to make up for the loss of the large selling drugs.

Speights: You mentioned Amgen doing share buybacks. The company had, I think, around $10.6 billion or so in cash and equivalents at the end of the first quarter.

Amgen has already announced a couple of acquisitions this year. It completed the acquisition of Five Prime Therapeutics, it also announced that it's buying a small biotech, Rodeo Therapeutics. Brian, my guess, my prediction, anyway, is that we're going to see Amgen use a good bit more of its cash to make more deals. What do you think?

Orelli: Yeah, I think that even if they used all 5 billion, they're going to have some cash float in there, too, so I think that still leaves them plenty of cash to add to the pipeline.

Brian Orelli, PhD has no position in any of the stocks mentioned. Keith Speights owns shares of Bristol Myers Squibb. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amgen Inc. Stock Quote
Amgen Inc.
AMGN
$226.87 (-0.67%) $-1.54

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.