It was business as usual for biotech behemoth Amgen (NASDAQ:AMGN) which dazzled Wall Street with another quarter of strong results.
For the fourth-quarter, which it reported earlier this evening, Amgen saw sales grow by 6% to $5.33 billion, led by 8% growth in product sales. Even more impressively, Amgen's adjusted profit grew by 19% to $2.16 per share. Comparatively both figures flew past expectations with analysts calling for $5.2 billion in revenue and just $2.05 in EPS. On the surface it looks like a solid quarter.
However, Amgen's figures only hint at what a phenomenally strong quarter this actually was. A single sentence buried under its "total product sales" subhead tells you everything you need to know about Amgen's quarterly results.
One sentence that tells you everything you need to know
This sentence in question reads, "Growth for the quarter was due primarily to higher unit demand, and to a lesser extent, price."
Soak that in for a moment. Amgen just told you that the primary reason total product sales grew 8% had little to do with the company raising its prices. Instead, it was a genuine increase in demand for its products. That's exactly what investors need to hear after the company's share price has tripled since 2011.
What led the charge in Q4? A better question would be "what didn't?"
Neulasta, Amgen's best-selling product which is administered to patients undergoing chemotherapy to encourage white blood cell production, saw sales rise 7% to $1.18 billion. Osteoporosis and bone-related problem drugs Xgeva and Prolia combined for $640 million in sales during Q4, a 23% increase from the year-ago period. Other highlights include a 25% increase in Kyprolis sales to $91 million from the year-ago quarter, and an 11% increase in Enbrel sales.
Costs were also indicative of Amgen's long-term goal of being thriftier with its spending. Remember, Amgen's hitting its stride where some 10 late-stage products are delivering top-line results between 2014 and 2016, and these studies aren't cheap to conduct. In order to curb some of these costs Amgen has been paring back its workforce and R&D spending. In Q4 Amgen reported flat year-over-year selling, general and administration costs and research and development costs. The only expense that rose was its cost of sales, which is to expected with a rise in product demand.
Staying the course
When it came to its guidance for fiscal 2015 Amgen stood its ground and reaffirmed its previous forecast which calls for $20.8 billion to $21.3 billion in revenue and $9.05 to $9.40 in EPS. At the midpoint of these ranges Amgen is forecasting 4.9% sales growth and 6% EPS growth in 2015. That might appear modest, but keep in mind that Amgen could be shelling out cash left and right to launch a number of new drugs in 2015.
Amgen also made waves when it announced that it had submitted marketing applications in the United States and in the EU for Kyprolis as a second-line treatment for multiple myeloma. Kyprolis is an integral component to Amgen's future growth, and it was a key puzzle piece that led to Amgen buying Onyx Pharmaceuticals for $10.4 billion.
Of course, everything hinges on whether or not Kyprolis is granted approval in the more lucrative second-line indication (currently Kyprolis is approved in third-line or higher indications). The ASPIRE and FOCUS studies led to some differing conclusions for Kyprolis, demonstrating it was a non-inferior medication to what's already on the market, but not exactly adding any demonstrable survival benefit.
A challenging year
In spite of Amgen's arguably strong results, I suspect it's going to be a challenging year. While the company does have more catalysts than Wall Street and investors can seemingly count, it also has gigantic shoes to fill after seeing its valuation soar since 2011. Kyprolis is going to play a big role on whether or not Amgen can maintain its lofty levels. Additionally, we'll soon see generic competition for Amgen's top-selling white blood cell enhancer in the not so distant future.
In short, it could be tough to justify any further upside in Amgen shares with a lot of positive data and expected approvals from the Food and Drug Administration already baked in. I'm personally sticking to the sidelines for now, but intend on watching Amgen like a hawk.