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Image source: Amgen via Flickr.

The original biotech blue-chip stock, Amgen (NASDAQ:AMGN), reported its third-quarter earnings results after the closing bell on Wednesday. As it's done in all but one of the previous 12 quarters, Amgen absolutely blew past Wall Street's expectations and signaled that its long-term outlook appears to be right on track.

Amgen's Q3, by the numbers
For the quarter, Amgen delivered stellar sales growth of 14% to $5.72 billion, noting that currency translation negatively affected revenue by two percentage points. Amgen derives a majority of its revenue from the U.S., so currency moves don't tend to affect it much. Relatively new therapies provided the bulk of the growth, with anti-inflammatory Enbrel also chiming in with big sales gains.

Adjusted profit for the quarter rose 18% to $2.72 per share, lifted by the aforementioned 14% boost in sales, as well as a 2% increase in operating margin. Cash flow generation also increased from $2.6 billion in Q3 2014 to $2.7 billion in the latest quarter.

Comparatively, Wall Street was expecting a much more modest $5.33 billion in revenue and just $2.38 in EPS. In other words, Amgen absolutely crushed Wall Street's third-quarter expectations. Not only that, but Amgen also increased its full-year guidance for 2015 (which was above and beyond the Street's current forecast), and offered up more or less in-line guidance for 2016.

For 2015 Amgen anticipates reporting $21.4 billion to $21.6 billion in revenue, up from a prior forecast of $21.1 billion to $21.4 billion, with a profit of $9.95 to $10.10 per share, up from its previous projection of $9.55 to $9.80 in full-year EPS. Looking ahead to 2016, Amgen foresees revenue ranging between $21.7 billion and $22.3 billion, and full-year EPS expanding to $10.35 to $10.75.

Newer drugs lead the way
Arguably the highlight for Amgen's report is the strength of its relatively new therapies (i.e., drugs introduced within the past three or four years).

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Image source: Amgen.

All eyes were clearly on multiple myeloma drug Kyprolis, which in July had its label expanded by the FDA to treat second-line multiple myeloma patients. Previously, Kyprolis was only approved in a third-line setting and above. The initial sales bump in its first full quarter since the label expansion was encouraging, with sales of $137 million worldwide, up 46% from the $94 million recorded in the year-ago quarter.

What'll be interesting to see is how well Celgene's (NASDAQ:CELG) Revlimid performs when it reports its results next week. Celgene's lead drug is a staple treatment for first-line and second-line multiple myeloma, and it will be interesting to see if Kyprolis is actually taking share from Revlimid in the second-line setting, or if the added option of Kyprolis has merely expanded the potential market size for both drugs.

Bone-related therapies have also been a bright spot for Amgen. Xgeva and Prolia witnessed their sales rise by 19% and 25%, respectively, to $378 million and $320 million. It's a plausible conclusion that as the baby boomer population ages, the need for bone-strengthening products, or products that support bone health during cancer treatment, is likely to grow in importance.

Don't be fooled by this strength
One area where Amgen (in my opinion) underperformed was with its mature drugs. Anti-inflammatory drug Enbrel is on pace to be a $5 billion drug in 2015, and it delivered 30% top-line sales growth according to Amgen. However, digging deeper we find that a huge price increase and lower inventory levels are what really led to its year-over-year growth. Demand for Enbrel actually dipped 6% year-over-year, and that's a bit concerning.

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Image source: Amgen.

But Enbrel wasn't the only drug relying on price hikes to drive growth in the latest quarter. Neulasta, a drug given to cancer patients to boost their white blood cell counts following chemotherapy, saw price hikes and favorable inventory changes boost its growth by 6%. Demand for the product rose by a mere 1%. Competition for Neupogen was even tougher, with demand down 10% from the prior-year quarter. Demand for Epogen also dipped noticeably as physicians switched to Amgen's other product, Aranesp, instead, essentially producing a stalemate.

In general, Amgen's mature drugs portfolio was a bit disappointing.

Amgen's saving grace
The saving grace for Amgen, and why investors are willing to forgive weakness in demand for Amgen's bread and butter mature therapies, is its late-stage pipeline.

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Image source: Amgen.

Amgen's pipeline has produced six approvals over the past year, including one just this week, with the FDA approving Imlygic (previously talimogene laherparapvec) for the treatment of metastatic melanoma after initial surgery. Additionally, Amgen's report would appear to suggest that LDL-cholesterol-lowering injection Repatha isn't running into too many problems in terms of insurance coverage despite its $14,100 annual wholesale cost. .

Looking ahead, Amgen's going to be turning its attention to effectively launching (or expanding, in the case of Kyprolis) these half-dozen therapies, and toward its biosimilar pipeline, which is expected to deliver two key late-stage findings over the next year. Top-line data for its Avastin biosimilar (ABP 215) in non-small cell lung cancer should be out this quarter, top-line phase 3 data for a biosimilar of Herceptin for breast cancer will hit the newswires in the second-half of 2016, and Amgen plans to submit regulatory paperwork worldwide for ABP 501, a biosimilar for Humira, in the fourth quarter of this year.

Is Amgen worth buying?
It's time for the $64,000 question: Is Amgen worth buying following the release of its third-quarter earnings results?

Although Amgen's mature drug portfolio was a bit disappointing, and its expenses rose considerably even while letting go of 20% of its workforce in 2014, Amgen's late-stage pipeline offers a lot of potential. Of course, it also comes with a lot of risk, including Amgen's push into cardiovascular with heart failure drug Corlanor, PCSK9 inhibitor Repatha for lowering LDL-cholesterol, and, potentially, omecamtiv mecarbil, which has completed midstage studies. It's somewhat uncommon to see a megacap drug developer push into a new indication where it's not established, so there's certainly some level of risk (and promise) here.

Overall, though, I believe Amgen's stock is priced attractively for the long-term investor. Based on the midpoint of Amgen's 2016 EPS forecast, the company is valued at 15 times its forward earnings, and it has the opportunity to grow its top-line by 5% to 10% annually over the remainder of the decade. It also doesn't hurt that investors are being paid a 2% yield that's grown rapidly since being introduced in 2011. Amgen may be a little reluctant to boost its dividend substantially considering the expenses tied to launching its numerous new therapies, but I believe a higher dividend may soon be in the cards for shareholders.

Long story short, I believe Amgen's earnings report continues to validate the long-term thesis for optimists holding Amgen stock.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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