Are Amgen's New Drugs Doing Well Enough To Drive Sales?

We issued an updated research report on Amgen, Inc. (NASDAQ:AMGN) on Aug 14.

The leading biotech beat estimates on both earnings & sales in the second quarter, the results of which were announced on Jul 25. While Amgen slightly tightened the sales guidance, it raised the earnings outlook backed by its strong performance in the first half.

Amgen’s newer drugs – Prolia, Xgeva,Kyprolis,Vectibix, Nplate and Sensipar – are all performing well backed by strong demand.

Amgen is also progressing with its pipeline including biosimilar drugs. Important pipeline candidates include Aimovig/erenumab (prevention of migraine – under review in the U.S.), CNP520 (BACE inhibitor for Alzheimer's disease – phase III) and omecamtiv mecarbil (heart failure – phase III).

Amgen has 10 biosimilars in its pipeline. The company has collaborated with Allergan plc (NYSE:AGN) for the worldwide development and commercialization of three oncology antibody biosimilar medicines – Roche’s Herceptin, Avastin and Rituxan.

However, the company has some challenges in store given the presence of biosimilar competition and slowdown in sales of mature products. Volume growth of new products may not be enough to offset the lost sales due to the decline in mature brands like Enbrel, Epogen, Neulasta and Neupogen due to competitive pressure.

While Neulasta sales are being hurt by competition from PD-1s and other new cancer therapies, Neupogen sales are going down due to biosimilar competition in the U.S. from Zarxio. Zarxio is Sandoz’s (Novartis AG’s (NYSE:NVS) generic arm) biosimilar version of Neupogen, which was launched in the U.S. in Sep 2015

The company expects Neulasta and Neupogen sales to continue to be hurt by competitive dynamic through the rest of 2017. Meanwhile, Neulasta and Epogen could start facing biosimilar competition next year.

Also the softness in Enbrel’s sales due to stiff competitive pressure is a key cause of concern. Pricing pressure and stiff competition are hurting sales of Enbrel, one of the main drivers of Amgen’s revenues this year.

Meanwhile, uptake of Amgen’s PCSK9 inhibitor, Repatha, which gained FDA approval in Aug 2015, has not been very encouraging so far due to pricing and re-imbursement issues/payer restrictions. Sanofi (NYSE:SNY) and partner Regeneron Pharmaceuticals also faced similar issues with their PCSK9 inhibitor, Praluent.

In the second quarter, however, the company did notice some improving share trends for the drug, following the presentation of the outcomes study (FOURIER) data in March this year. The data showed significant reduction in myocardial infarctions and strokes. The company filed regulatory applications in both the U.S. and EU to include FOURIER data on Repatha’s label in Jun 2017 with a FDA decision expected on Dec 2, 2017.

Lastly, Amgen has had its share of pipeline setbacks. The latest being the complete response letter (CRL) received from the FDA for Evenity/romosozumab (osteoporosis in postmenopausal women at increased risk for fracture) in July, following the heart-related safety issue that emerged from the otherwise successful ARCH results. The FDA asked for safety and efficacy data from two pivotal phase III studies - ARCH and BRIDGE - to be included in the original application, which was filed only on the basis of the pivotal FRAME study. This will lead to a delay in the drug’s approval.

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