Amgen (AMGN) reported third quarter earnings per share of $1.47, well above the Zacks Consensus Estimate of $1.26 and 21% above the year-ago earnings of $1.21. Cost cuts and a lower tax rate helped boost the top-line despite a 2% decline in total revenues, which came in at $3,812 million.
Total product sales decreased 1% to $3,736 million. While sales in the U.S. were relatively unchanged at $2,918 million, international sales declined 4% to $818 million mainly due to the unfavorable impact of foreign exchange (Fx) fluctuation, which affected sales by approximately $76 million.
Aranesp sales declined 19% to $685 million (U.S. – $333 million, down 27%; ex-U.S. – $352 million, down 9%), mainly due to a decline in demand reflecting the negative impact, primarily in the supportive cancer care setting, of additional product label changes which occurred in August 2008. Aranesp continued to lose share in both the U.S. and ex-U.S. markets. International sales were also impacted by Fx fluctuations (approximately $29 million).
Epogen sales increased 5% to $663 million reflecting an increase in demand, which was supported by patient growth and an increase in average net sales price. Worldwide sales of Neulasta and Neupogen increased 2% to $1,210 million.
U.S. sales ($897 million) increased 5%, primarily due to an increase in demand which was driven by an increase in units sold and price increases. International sales fell 7% to $313 million, mainly due to the unfavorable foreign exchange impact which affected sales by $33 million.
Enbrel sales continued to grow in the reported quarter, mainly due to an increase in the average net sales price. Although sales increased 3% to $924 million, the company reported a decline in market share due to increased competition in the dermatology market.
Sensipar sales increased 2% to $165 million mainly due to increased international demand. U.S. sales declined 3% mostly because of a decrease in units sold. Recent launches of Vectibix in Europe helped drive Vectibix sales to $58 million. Label expansion into second and first-line metastatic colorectal cancer should help drive Vectibix’s future growth.
Operating expenses declined during the quarter, largely due to the company’s cost-cutting efforts. Cost of goods sold declined 8% to $542 million. While R&D expenses declined 12% mainly due to lower clinical trial costs and lower staff-related expenses, SG&A expenses rose 3% as the company increased its spending in anticipation of the approval and launch of denosumab.
The company reaffirmed its revenue guidance for 2009. Amgen expects to post revenues towards the higher end of $14.4 to $14.8 billion. However, the company increased its earnings guidance based on the better-than-expected third quarter results.
Earnings per share are now expected to come in the range of $4.90 to $5.05, up from the previous range of $4.80 to $4.95. A lower tax rate, revenues trending towards the upper end of the guidance range, and continued operating expense discipline should help the company achieve its earnings guidance.
Going forward, we expect investor focus to remain on the potential approval and launch of denosumab, which recently received a complete response letter from the U.S. Food and Drug Administration (FDA). While no new studies have been requested for the treatment of the postmenopausal osteoporosis (PMO) indication, additional studies will be needed for the prevention of PMO.
The company has also been asked to conduct additional studies for the use of denosumab as a treatment for bone loss in women with breast cancer receiving aromatase inhibitors, and in men with prostate cancer receiving hormone ablation therapy. While the candidate could receive approval in 2010 for the treatment of PMO, there could be a significant delay in gaining approval for additional indications given the FDA’s requirement for additional studies.
With all its key products slated to lose patent protection in the next few years, Amgen has a lot riding on the timely approval of denosumab. Any hiccup, either with respect to further delays at the FDA, a miss in any of the other ongoing phase III programs, or safety concerns post-launch, will weigh heavily on the shares. We have a Neutral rating on Amgen.
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