On April 24, 2018 Amgen (NASDAQ:AMGN) reported financial results for the first quarter of 2018 (Press release, Amgen, APR 24, 2018, View Source;p=RssLanding&cat=news&id=2344288 [SID1234525627]).
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Key results include:
Total revenues increased 2 percent versus the first quarter of 2017 to $5.6 billion.
Product sales grew 3 percent globally. All new and recently launched products including Repatha (evolocumab), KYPROLIS (carfilzomib), Prolia (denosumab) and XGEVA (denosumab) showed double-digit growth.
GAAP earnings per share (EPS) increased 16 percent to $3.25 driven by higher product sales, a lower tax rate and lower weighted-average shares outstanding.
GAAP operating income increased 5 percent to $2.7 billion and GAAP operating margin increased 1.2 percentage points to 51.0 percent.
Non-GAAP EPS increased 10 percent to $3.47 driven by higher product sales, a lower tax rate and lower weighted-average shares outstanding.
Non-GAAP operating income increased 1 percent to $3.0 billion and non-GAAP operating margin decreased 0.7 percentage points to 56.9 percent.
2018 EPS guidance revised to $11.30-$12.28 on a GAAP basis and $12.80-$13.70 on a non-GAAP basis; total revenues guidance revised to $21.9-$22.8 billion.
The Company generated $2.6 billion of free cash flow in the first quarter versus $2.2 billion in the first quarter of 2017.
Product Sales Performance
Total product sales increased 3 percent for the first quarter of 2018 versus the first quarter of 2017.
Repatha sales increased 151 percent driven primarily by higher unit demand.
BLINCYTO (blinatumomab) sales increased 44 percent driven by higher unit demand.
Sensipar/Mimpara (cinacalcet) sales increased 18 percent driven primarily by higher unit demand.
KYPROLIS sales increased 17 percent driven primarily by higher unit demand.
Prolia sales increased 16 percent driven primarily by higher unit demand.
Nplate (romiplostim) sales increased 16 percent driven by higher unit demand.
Vectibix (panitumumab) sales increased 15 percent driven primarily by higher unit demand.
XGEVA sales increased 11 percent driven primarily by higher unit demand.
Parsabiv (etelcalcetide) sales increased driven by our U.S. launch.
Neulasta (pegfilgrastim) sales decreased 5 percent driven by lower unit demand from continued declines in the use of myelosuppressive chemotherapy regimens and from favorable prior year changes in accounting estimates, offset partially by favorable changes in net selling price and inventory.
Enbrel (etanercept) sales decreased 6 percent driven primarily by lower unit demand and, to a lesser extent, lower net selling price and favorable prior year changes in accounting estimates, offset partially by favorable changes in inventory.
EPOGEN (epoetin alfa) sales decreased 10 percent driven primarily by unfavorable changes in net selling price and lower unit demand.
Aranesp (darbepoetin alfa) sales decreased 11 percent driven primarily by the impact of competition on unit demand.
NEUPOGEN (filgrastim) sales decreased 30 percent driven primarily by the impact of competition on unit demand.
Operating Expense, Operating Margin and Tax Rate Analysis
On a GAAP basis:
Total Operating Expenses decreased 2 percent, with all expense categories reflecting savings from our transformation and process improvement efforts. Cost of Sales margin improved by 1.5 percentage points driven primarily by lower royalties and a reduction in amortization of intangible assets, offset partially by increasing manufacturing costs. Research & Development (R&D) expenses were flat. Selling, General & Administrative (SG&A) expenses increased 6 percent due to investments in product launches and marketed product support.
Operating Margin improved by 1.2 percentage points to 51.0 percent.
Tax Rate decreased by 4.0 percentage points due to the impacts of U.S. corporate tax reform.
On a non-GAAP basis:
Total Operating Expenses increased 2 percent, with all expense categories reflecting savings from our transformation and process improvement efforts. Cost of Sales margin improved by 0.4 percentage points driven primarily by lower royalties, offset partially by increasing manufacturing costs. R&D expenses were flat. SG&A expenses increased 6 percent due to investments in product launches and marketed product support.
Operating Margin decreased by 0.7 percentage points to 56.9 percent.
Tax Rate decreased by 4.8 percentage points due to the impacts of U.S. corporate tax reform.
Cash Flow and Balance Sheet
The Company generated $2.6 billion of free cash flow in the first quarter of 2018 versus $2.2 billion in the first quarter of 2017 driven by higher net income.
The Company’s second quarter 2018 dividend of $1.32 per share declared on March 7, 2018, will be paid on June 8, 2018, to all stockholders of record as of May 17, 2018.
During the first quarter, the Company repurchased 56.4 million shares of common stock at a total cost of $10.8 billion.
2018 Guidance
For the full year 2018, the Company now expects:
Total revenues in the range of $21.9 billion to $22.8 billion.
Previously, the Company expected total revenues in the range of $21.8 billion to $22.8 billion.
On a GAAP basis, EPS in the range of $11.30 to $12.28 and a tax rate in the range of 12.5 percent to 13.5 percent.
Previously, the Company expected GAAP EPS in the range of $11.18 to $12.36, and a tax rate in the range of 13 percent to 14 percent.
On a non-GAAP basis, EPS in the range of $12.80 to $13.70 and a tax rate in the range of 13.5 percent to 14.5 percent.
Previously, the Company expected non-GAAP EPS in the range of $12.60 to $13.70, and a tax rate in the range of 14 percent to 15 percent.
Capital expenditures to be approximately $750 million.
The Company provided the following updates on selected product and pipeline programs:
Repatha
In March, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion to include a new indication for adults with established atherosclerotic cardiovascular disease (myocardial infarction, stroke or peripheral arterial disease) to reduce cardiovascular risk by lowering LDL-C levels.
Neulasta
In February, the CHMP adopted a positive opinion recommending a label variation for Neulasta to include the Neulasta Onpro Kit.
XGEVA
In April, the European Commission approved an expanded indication for the prevention of skeletal-related events in adults with advanced malignancies involving bone. The indication now covers patients with bone metastases from solid tumors and those with multiple myeloma.
BLINCYTO
In March, the U.S. Food and Drug Administration (FDA) approved BLINCYTO for the treatment of adults and children with B-cell precursor acute lymphoblastic leukemia in first or second complete remission with minimal residual disease (MRD) greater than or equal to 0.1 percent. This indication is approved under accelerated approval based on MRD response rate and hematological relapse-free survival.
KANJINTI (ABP 980)
In March, the CHMP adopted a positive opinion for the marketing authorization of KANJINTI, a biosimilar to Herceptin (trastuzumab) for the treatment of the same three types of cancer as Herceptin is approved for in the European Union, including HER2-positive metastatic breast cancer, HER2-positive early breast cancer and HER2-positive metastatic adenocarcinoma of the stomach or gastroesophageal junction.
EVENITY, Aimovig and KANJINTI trade names provisionally approved by FDA
EVENITY is developed in collaboration with UCB globally, as well as our joint venture partner Astellas in Japan
Aimovig is developed in collaboration with Novartis
Herceptin is a registered trademark of Genentech
Non-GAAP Financial Measures
In this news release, management has presented its operating results for the first quarters of 2018 and 2017, in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2018 EPS and tax rate guidance in accordance with GAAP and on a 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. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the first quarters of 2018 and 2017. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP.
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 ongoing business activities by facilitating comparisons of results of ongoing business operations among current, past and future periods. 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 news release in connection with its own budgeting and financial planning internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets. 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.