On October 28, 2015 Amgen (NASDAQ:AMGN) reported financial results for the third quarter of 2015. Key results include:
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Total revenues increased 14 percent versus the third quarter of 2014 to $5,723 million, with 14 percent product sales growth driven primarily by Enbrel (etanercept), Sensipar (cinacalcet), Neulasta (pegfilgrastim), Prolia (denosumab), XGEVA (denosumab) and Kyprolis (carfilzomib) (Press release, Amgen, OCT 28, 2015, View Source;p=RssLanding&cat=news&id=2103603 [SID:1234507905]). Unfavorable changes in foreign exchange rates impacted total revenue and product sales growth by 2 percentage points.
Adjusted EPS grew 18 percent versus the third quarter of 2014 to $2.72 driven by higher revenues and higher operating margins. Adjusted operating income increased 19 percent to $2,686 million and adjusted operating margin improved by 2 percentage points to 49 percent.
GAAP EPS were $2.44 compared to $1.61 and GAAP operating income was $2,339 million compared to $1,466 million. The prior year was negatively impacted by charges for the restructuring plan announced in the third quarter of 2014.
The Company generated $2.7 billion of free cash flow compared to $2.6 billion in the third quarter of 2014.
"We delivered record revenues, adjusted earnings and cash flow in the third quarter, while improving our operating margins and investing in six exciting new product launches," said Robert A. Bradway, chairman and chief executive officer. "With several innovative medicines still in development, we are well on the way to achieving our long-term objectives for shareholders and patients alike."
Third Quarter 2015 Product Sales Performance
Total product sales increased 14 percent for the third quarter of 2015 versus the third quarter of 2014. The increase was driven primarily by ENBREL, Sensipar, Neulasta, Prolia, XGEVA and Kyprolis. Growth for the quarter was due to net selling price, low inventory levels in the prior year period and higher unit demand.
ENBREL sales increased 30 percent year-over-year driven by net selling price and low inventory levels in the prior year period, offset partially by the impact of competition.
Neulasta sales increased 6 percent year-over-year driven by net selling price and favorable changes in inventory levels.
Aranesp (darbepoetin alfa) sales increased 4 percent year-over-year driven by higher unit demand, including a shift in dialysis customer purchases from EPOGEN (epoetin alfa), offset partially by net selling price and unfavorable changes in foreign exchange rates.
EPOGEN sales decreased 6 percent year-over-year driven by the impact of competition and the shift to Aranesp, offset partially by favorable changes in inventory levels and net selling price.
XGEVA sales increased 19 percent year-over-year driven primarily by higher unit demand.
Sensipar/Mimpara sales increased 29 percent year-over-year driven by low inventory levels in the prior year period, net selling price and higher unit demand.
Prolia sales increased 25 percent year-over-year driven by higher unit demand.
NEUPOGEN (filgrastim) sales decreased 5 percent year-over-year driven primarily by the impact of competition in the United States (U.S.).
Kyprolis sales increased 46 percent year-over-year driven by higher unit demand.
Nplate (romiplostim) sales increased 15 percent year-over-year driven by higher unit demand.
Vectibix (panitumumab) sales decreased 4 percent year-over-year driven by unfavorable changes in foreign exchange rates. Strong unit growth continued in the U.S. and Europe.
Third Quarter Operating Expense, Operating Margin and Tax Rate Analysis, on an Adjusted Basis
Operating Expenses increased 10 percent. Operating expense growth was reduced by 3 percentage points due to changes in foreign exchange rates.
Cost of Sales margin improved 2.2 points driven by net selling prices, lower royalty expense and manufacturing efficiencies.
Research & Development (R&D) expenses increased 11 percent driven by upfront payments related to the Company’s recent deal activity and increased support for launch products, offset partially by savings from transformation and process improvement efforts.
Selling, General & Administrative expenses increased 17 percent driven primarily by investments in new product launches and ENBREL-related payments, offset partially by savings from transformation and process improvement efforts.
Operating Margin improved by 2 percentage points to 49 percent.
Tax Rate increased 0.9 percentage points to 18.0 percent primarily due to changes in the geographic mix of earnings.
Cash Flow and Balance Sheet Discussion
The Company generated $2.7 billion of free cash flow in the third quarter of 2015 versus $2.6 billion in the third quarter of 2014.
The Company’s fourth quarter 2015 dividend of $0.79 per share declared on Oct. 14, 2015, will be paid on Dec. 7, 2015, to all stockholders of record as of the close of business on Nov. 16, 2015.
During the third quarter, the Company repurchased 4.6 million shares of common stock at a total cost of $0.7 billion.
2015 Guidance
For the full year 2015, the Company now expects:
Total revenues in the range of $21.4 billion to $21.6 billion and adjusted EPS in the range of $9.95 to $10.10. Previously, the Company expected total revenues in the range of $21.1 billion to $21.4 billion and adjusted EPS in the range of $9.55 to $9.80.
Adjusted tax rate to be in the range of 18 percent to 19 percent. This excludes the benefit of the federal R&D tax credit, which has not yet been extended for 2015.
Capital expenditures to be approximately $700 million.
2016 Preliminary Guidance
For the full year 2016, the Company expects:
Total revenues in the range of $21.7 billion to $22.3 billion and adjusted EPS in the range of $10.35 to $10.75.
Adjusted tax rate to be in the range of 20.5 percent to 21.5 percent, excluding the federal R&D tax credit.
Capital expenditures to be approximately $700 million.
Dividend planned to be increased 27 percent to $1.00 per share in the first quarter of 2016.
Share repurchases of $2 billion to $3 billion in 2016. In October 2015, the Company’s Board of Directors approved an increase in the remaining share repurchase authorization for an aggregate authorization of $5 billion.
Third Quarter Product and Pipeline Update
Repatha
In August, the U.S. Food and Drug Administration (FDA) approved Repatha as an adjunct to diet and maximally tolerated statin therapy for treatment of adults with heterozygous familial hypercholesterolemia (FH) or clinical atherosclerotic cardiovascular disease, who require additional lowering of low-density lipoprotein cholesterol (LDL-C). Repatha is also indicated as an adjunct to diet and other LDL-lowering therapies for the treatment of patients with homozygous FH who require additional lowering of LDL-C. The effect of Repatha on cardiovascular morbidity and mortality has not been determined.
The requisite number of events in the event driven Phase 3 cardiovascular outcomes study is expected to accrue by mid-2016, with top-line data expected in H2 2016.
A supplemental Biologics License Application for a monthly administration single-dosing option was submitted to FDA and has received a Prescription Drug User Fee Act target action date of July 10, 2016.
Omecamtiv mecarbil
Phase 2 data in patients with chronic heart failure showed statistically significant improvements in several pre-specified measures of cardiac function.
Kyprolis
In the EU, the Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion recommending marketing authorization for Kyprolis in combination for the treatment of relapsed multiple myeloma based on data from the Phase 3 ASPIRE study.
FDA granted priority review to the supplemental New Drug Application submitted in the U.S. based on data from the Phase 3 ENDEAVOR study.
BLINCYTO (blinatumomab)
The CHMP issued a positive opinion recommending marketing authorization for the treatment of Philadelphia chromosome-negative B-precursor relapsed or refractory acute lymphoblastic leukemia.
IMLYGIC
The FDA approved IMLYGIC for the local treatment of unresectable cutaneous, subcutaneous and nodal lesions in patients with melanoma recurrent after initial surgery. IMLYGIC has not been shown to improve overall survival or have an effect on visceral metastases.
The CHMP issued a positive opinion recommending marketing authorization for the treatment of adults with unresectable melanoma that is regionally or distantly metastatic (Stage IIIB, IIIC and IVM1a) with no bone, brain, lung or other visceral disease.
Etelcalcetide (AMG 416)
A New Drug Application was submitted in the U.S. and a Marketing Authorization Application was submitted in the EU for the treatment of secondary hyperparathyroidism in patients with chronic kidney disease on hemodialysis therapy.
Non-GAAP Financial Measures
In this news release, management has presented its operating results for the third quarters of 2015 and 2014 in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on an adjusted (or non-GAAP) basis. In addition, management has presented its full year 2015 and 2016 EPS and tax rate guidance in accordance with GAAP and on an adjusted (or non-GAAP) basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the third quarters of 2015 and 2014. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release.
The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor’s overall understanding of the financial performance and prospects for the future of the Company’s core business activities by facilitating comparisons of results of core business operations among current, past and future periods. In addition, the Company believes that excluding the non-cash amortization of intangible assets, including developed product technology rights, acquired in business combinations treats those assets as if the Company had developed them internally in the past, and thus provides a supplemental measure of profitability in which the Company’s acquired intellectual property is treated in a comparable manner to its internally developed intellectual property. The Company believes that FCF provides a further measure of the Company’s liquidity.
The Company uses the non-GAAP financial measures set forth in the press release in connection with its own budgeting and financial planning. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.