Amgen (AMGN) Stock Down Despite Q4 Earnings & Revenue Beat

Amgen (NASDAQ:AMGN) reported fourth-quarter 2019 earnings of $3.64 per share, which beat the Zacks Consensus Estimate of $3.44. Earnings rose 6% year over year as lower revenues and higher R&D costs were offset by a lower share count.

Total revenues of $6.2 billion in the quarter beat the Zacks Consensus Estimate of $6.0 billion. However, total revenues declined 1% year over year.

Amgen shares have risen 20.9% in the past year against 5.6% decrease registered by the industry during this period.

Quarter in Detail

Total product revenues decreased 2% from the year-ago quarter to $5.88 billion (U.S.: $4.37 billion; ex-U.S.: $1.51 billion). Increasing demand of Amgen’s growth and launch drugs like Prolia, Repatha, Aimovig, Parsabiv and others and strong sales of biosimilar products and in ex-U.S. markets was offset by the erosion of mature brands from biosimilar/new competition. Product sales growth was mostly driven by higher volumes (up 3%) as prices were lower for several drugs. Net selling prices declined 4% year over year in the quarter, which resulted in the decline in total revenues.

Other revenues of $316 million rose 38% in the quarter.

Prolia revenues came in at $752 million, up 15% from the year-ago quarter, driven by volume increases resulting from new patient growth as well as strong repeat rates.

Xgeva delivered revenues of $489 million, up 7% from the year-ago quarter mainly due to higher demand, which drove volumes up 4%.

Kyprolis recorded sales of $266 million, up 6% year over year driven primarily by 12% volume growth in the United States.

Blincyto sales increased 27% from the year-ago period to $80 million.

Repatha generated revenues of $200 million, up 26% year over year, as higher volume was partially offset by lower prices.

Vectibix revenues came in at $182 million, up 8% year over year. Nplate sales rose 15% to $210 million.

Parsabiv recorded sales of $179 million, up 49% as higher demand offset the impact of lower selling prices.

Amgen’s new migraine drug, Aimovig recorded sales of $98 million in the quarter, higher than $66 million in the previous quarter as higher demand was partially offset by unfavorable changes in accounting estimates.

Newly launched osteoporosis drug, Evenity recorded sales of $85 million in the quarter compared with $59 million in the previous quarter, driven by strong uptake in both Japan and the United States where the product has been launched. In the United States, where Evenity was launched in April 2019, sales were $27 million while international sales were $58 million. Evenity was approved in Europe in December 2019.

Amgen recorded total biosimilars revenues of $258 million in the quarter. Amgen markets Kanjinti (a biosimilar of Roche’s (OTC:RHHBY) Herceptin) and Mvasi (biosimilar of Roche’s Avastin) in the United States and Amgevita (biosimilar of AbbVie’s (NYSE:ABBV) Humira), Kanjinti and Mvasi outside of the United States. Amjevita sales were $71 million in the quarter. Sales of Kanjinti and Mvasi were $103 million and $84 million, respectively. Kanjinti and Mvasi were launched in the United States in July 2019. On the call, Amgen mentioned that it now faces additional biosimilar competition for Kanjinti and Mvasi and expects other competitors to enter the market in 2020.

Amgen expects more biosimilars to gain approval this year and contribute to total revenues, especially as drug pricing issues increase demand for lower cost treatment options. In December, the FDA granted approval to Avsola (ABP 710), Amgen’s biosimilar version of J&J/Merck’s blockbuster immunology medicine, Remicade. It also filed a biologics license application (BLA) to the FDA for ABP 798, a biosimilar candidate to Roche’s Rituxan in the same month.

In November, Amgen completed the previously-announced acquisition of Celgene’s blockbuster psoriasis drug, Otezla, which the latter had to divest in order to complete its merger with Bristol-Myers (NYSE:BMY) . Sales of Otezla were $178 million for the approximately five weeks post closing in 2019.

However, Amgen’s mature drugs like Enbrel, Aranesp, Epogen, Neupogen and Neulasta are facing an array of branded and generic competitors.

Aranesp revenues declined 10% from the prior-year quarter to $427 million on lower volume due to increased competitive pressure. Meanwhile, lower net selling price as well as unfavorable changes in inventory hurt sales.

Revenues of the other ESA, Epogen, declined 20% to $210 million due to lower selling prices and demand with the category becoming extremely competitive.

Neulasta revenues declined 43% from the year-ago period to $665 million due to lower selling prices and biosimilar competition.

Neupogen recorded 17% decline in sales to $62 million in the quarter. Enbrel delivered revenues of $1.35 billion, up 2% from the year-ago quarter, driven primarily by favorable changes in inventory along with a slight price increase, which offset volume declines due to continued competition.

Sensipar/Mimpara revenues declined 76% to $107 million due to several at-risk generic launches. Other product sales rose 19% to $87 million.

Operating Margins Decrease

Adjusted operating margin declined 70 basis points (bps) to 44.6%. Adjusted operating expenses rose 2% year over year in the quarter to $3.58 billion. SG&A spend decreased 2% to $1.5 billion on cost control, which offset the impact of Otezla related expenses. R&D expenses rose 11% year over year to $1.29 due to higher spending on Amgen’s early- and late-stage oncology pipeline.

2019 Results

Full-year 2019 sales declined 2% to $23.36 billion, beating the Zacks Consensus Estimate of $23.18 billion. Sales slightly topped the guided range of $23.1-$23.3 billion. Product sales declined 1%.

Adjusted earnings for 2019 of $14.82 per share were also above the Zacks Consensus Estimate of $14.63 as well as the guided range of $14.50-$14.70. Earnings rose 3% year over year.

2020 Outlook

Amgen issued its financial guidance for 2020. In the year, it expects revenues in the range of $25.0 billion-$25.6 billion which indicates an increase from 2019 levels. In 2020, Amgen’s base business, excluding Otezla, is expected to be stable. The Zacks Consensus Estimate for revenues stands at $25.33 billion.

Importantly, Amgen's net selling price for its drugs fell 5% globally in 2019 and is expected to decline in 2020 at a low to mid-single digit rate.

Adjusted earnings per share are anticipated in the range of $14.85-$15.60. The Zacks Consensus Estimate was pegged much higher at $15.98 per share.

Adjusted operating costs are expected to grow in a low double-digit percentage range year over year in 2020.

Amgen plans to spend approximately $700 million for capital expenditures in 2020.

Our Take

Amgen’s stock was down 2.5% in after-hours trading despite announcing strong fourth-quarter results. This is because its 2020 earnings guidance fell well short of expectations.

In 2020, while Amgen’s growth products like Prolia, Evenity, Repatha, Aimovig, Otezla will drive sales, increasing competition for its legacy products will continue to create pressure on sales. However, biosimilars and international expansion provide incremental growth opportunities. Amgen boasts a strong biosimilars portfolio, which can drive long-term growth. Amgen is also progressing with its pipeline while regularly pursuing “external opportunities”, such as the acquisition of Otezla and the recently acquired acquired 20.5% stake in China's BeiGene Ltd. Amgen also expects several important clinical data readouts from its innovative pipeline this year.

Amgen currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amgen Inc. Price, Consensus and EPS Surprise