UPDATE: Amgen 1Q Profit Drops 7.4%; Cuts '09 Revenue View
April 23 2009 - 6:23PM
Dow Jones News
Amgen Inc. (AMGN) reported a 7.4% decline in first-quarter
earnings and lowered its 2009 revenue expectations as increased
competition and the troubled economy cut into sales of the biotech
giant's drugs.
The disappointing revenue numbers at the Thousand Oaks, Calif.,
company - highlighted by a 20% decline in sales of arthritis drug
Enbrel - increases the need for success of Amgen's experimental
bone drug denosumab, which should get an approval decision from the
Food and Drug Administration in October.
In a conference call, Chief Executive Kevin Sharer blamed
economic conditions for causing patients to postpone doctor visits,
stop taking medicines, and declining to pay for expensive insurance
co-pays.
"We now know that, for the first time, the biopharmaceutical
industry is not exempt from these economic factors," Sharer
said.
Leerink Swann analyst Jonas Alsenas called the results "a little
bit surprising" and described Amgen's recent earnings performance
as a leaky bucket because it faces sales pressure on multiple
fronts -- safety and regulatory concerns of its anemia treatments,
Aranesp and Epogen; increased competition for Enbrel; and European
biosimilar competition for Neupogen, which wards off infections in
chemotherapy patients.
In after-hours trading, Amgen shares - down 19% for the year -
fell 2.3% to $45.75.
For the three months ended March 31, Amgen reported net income
of $1.02 billion, or 98 cents a share, down year-ago earnings of
$1.1 billion, or $1.01 a share. Excluding items, earnings were
$1.08 a share, well below the average analyst estimate of $1.15,
according to Thomson Reuters.
Revenue dropped 8.5% to $3.31 billion, also far below Street
expectations of $3.63 billion.
The disappointing quarter led Amgen to cut its 2009 revenue
projection to a range of $14.4 billion to $14.8 billion, down from
its previous estimate of $14.8 billion to $15.2 billion. Wall
Street had expected $14.9 billion.
Despite the drop in the topline projections, Amgen backed its
adjusted earnings per-share guidance of $4.55 to $4.75, a sign of
the company's ability to control costs in order to maintain
profits. Analysts currently project annual earnings of $4.62 a
share.
Even before the disappointing quarter, Wall Street has been
focused on Amgen's lead pipeline candidate denosumab, the future
growth driver that is estimated to have peak yearly sales between
$1 billion to up to $10 billion.
"Now more than ever, denosumab is critical to future earnings
growth for Amgen," Alsenas said, noting that an unsuccessful launch
of the drug may force the company into a merger or takeover.
The FDA is reviewing the drug's application for use in
osteoporosis patients and data on the drug's use in cancer patients
whose disease has spread to the bone is expected later this year,
providing another possible market for the drug.
In the first quarter, Aranesp sales dropped 18% to $626 million,
coming far below a Wall Street consensus estimate of $659 million,
according to MDRx Financial, a health-care market research firm.
Sales of Epogen, an earlier version of Aranesp, rose 2% to $565
million, also missing expectations of $614 million.
The drop in Aranesp is surprising, but the anemia franchise has
been a difficult area for the past two years because studies showed
the drugs may be overused, increase cardiovascular risks and fuel
certain kinds of cancer.
More surprising is the 20% drop in Enbrel sales to $758 million,
which was below an MDRx analyst consensus estimate of $906 million.
Amgen sells Enbrel in North America, and Wyeth Inc. (WYE)
distributes elsewhere.
On the call, Sharer said the drug was hit hard by economic
troubles as patients had trouble being able to pay their insurance
co-pay in order to receive the drug.
In recent years, Enbrel has continued growth in the face of
competition from Abbott Laboratories' (ABT) Humira. Alsenas notes
that Enbrel likely benefitted from total market growth, even though
it was losing its share of that market to Humira.
Combined first-quarter sales of Neulasta and Neupogen, used to
prevent infections in patients receiving chemotherapy, rose 1% to
$1.07 billion, also falling short of Wall Street expectations of
$1.17 billion.
-Thomas Gryta; Dow Jones Newswires; 201-938-2053;
thomas.gryta@dowjones.com