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Amgen (AMGN) Tops Q1 Earnings & Revenues, Ups View

Biotech major, Amgen Inc. AMGN, reported first quarter 2016 earnings of $2.90 per share, well above the Zacks Consensus Estimate of $2.56 and the year-ago earnings of $2.48.

Total revenues increased 10% to $5,527 million in the first quarter of 2016, beating the Zacks Consensus Estimate of $5,362 million. Amgen’s six growth products – Prolia, Xgeva, Vectibix, Nplate, Sensipar, and Enbrel – totaled nearly $3 billion in revenues or more than half of first quarter sales, growing 20% year over year. Currency negatively impacted first quarter sales by five percentage points.

The Quarter in Detail

Total product revenues increased 7% from the year-ago quarter to $5,239 million (U.S.: $4,119 million, ex-U.S.: $1,120 million) with products like Enbrel, Prolia, Aranesp, Neulasta, Kyprolis and Xgeva driving growth.

Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp grew 11% from the year-ago quarter to $532 million reflecting higher unit demand in the U.S. given the shift in dialysis customer purchases from Epogen. This was partially offset by price and unfavorable currency movement.

Revenues of Amgen’s other ESA, Epogen, declined 44% to $300 million, reflecting a shift in dialysis customer purchases to Aranesp as well as the impact of competition. Fresenius FMS has moved more than 70% of its patients to Mircera. Amgen does not expect Epogen biosimilars in the U.S. in 2016.

While Neulasta revenues grew 4% to $1,183 million from the year-ago period mainly due to higher unit demand and net selling price in the U.S., Neupogen recorded a 13% decline in revenues ($213 million) reflecting competition in the U.S. Competition for Neupogen is expected to increase.

Meanwhile, Neulasta benefited from some inventory stocking in the U.S. which should burn off in the second quarter. Neulasta Onpro kit (on-body injector) continues to perform well, accounting for one-third of the Neulasta business in the U.S. Amgen said that it does not expect biosimilar competition for Neulasta in the U.S. until the end of 2016 assuming 180-day notice after approval.

Enbrel delivered revenues of $1,385 million, up 24% from the year-ago quarter, benefiting from net selling price, offset partially by competition. Amgen reported a 1% sequential decline in dermatology market share (21%) while rheumatology market share remained at 28%.

Prolia revenues came in at $352 million, up 29% from the year-ago quarter due to higher demand. While Prolia did see some seasonality typical of the first quarter, Amgen said that its DTC promotional efforts in the U.S. continued to drive new patient adoption and repeat injection rates of more than 65%.

Meanwhile, Xgeva delivered revenues of $378 million, up 11% from the year-ago quarter due to higher demand driven by focus on superior clinical profile versus the competition. Xgeva also benefited from increased levels of purchasing by some large end customers in the U.S., which should burn off in the next quarter.

Amgen intends to provide data on Xgeva from the phase III study for the prevention of skeletal-related events in patients with multiple myeloma in the second half of 2016.

Sensipar/Mimpara revenues increased 10% from the year-ago quarter to $367 million due to higher demand and price, partially offset by unfavorable changes in inventory levels. Vectibix revenues came in at $144 million during the quarter, up 18% from the year-ago quarter reflecting higher unit demand.

Kyprolis posted sales of $154 million, up 4.1% sequentially and 43% above the year-ago period reflecting higher demand. Unit growth was driven by increased share and duration of treatment. The U.S. approval in relapsed or second-line multiple myeloma has expanded the patient population significantly and should boost sales further.

Blincyto increased 80% from the year-ago period to $27 million reflecting higher demand. Repatha revenues came in at $16 million.

While R&D expenses remained flat, SG&A spend grew 11% from the year-ago period.

Ups 2016 Guidance

Amgen upped its 2016 outlook to reflect an improved revenue outlook as well as a lower tax rate. The company now expects total revenues of $22.2 billion - $22.6 billion and earnings of $10.85 - $11.20 per share. Earlier, the company had guided towards total revenues of $22.0 billion - $22.5 billion and earnings of $10.60 - $11.00 per share. The Zacks Consensus Estimate for revenues and earnings is $22.3 billion and $10.82 per share, respectively.

Amgen bought back shares worth $690 million during the quarter and has $4.2 billion remaining under its buyback program. The company intends to buy back shares worth $2 billion - $3 billion in 2016.

Our Take

Amgen continues to impress with its results by surpassing expectations yet again and raising its outlook. While the company has some challenges in store given the presence of biosimilar competition and slowdown in mature products, contribution from new product launches should be meaningful. Kyprolis looks well-positioned to gain share with both the ASPIRE and ENDEAVOR data in its U.S. label. Meanwhile, the company’s restructuring plan should make it leaner and more cost-efficient.

Amgen is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the healthcare sector include Celgene Corporation CELG and Medivation, Inc. MDVN – both are Zacks Rank #2 (Buy) stocks.

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