The FINANCIAL — Amgen on October 27 announced financial results for the third quarter of 2016. Key results include:
Revenues increased 2 percent versus the third quarter of 2015 to $5.8 billion.
Strong unit volume growth from Sensipar (cinacalcet), Prolia (denosumab), Vectibix (panitumumab), XGEVA (denosumab) and Nplate® (romiplostim).
GAAP earnings per share (EPS) increased 10 percent to $2.68 driven by higher revenues and higher operating margins.
GAAP operating income increased 8 percent to $2,527 million and GAAP operating margin improved by 3.4 percentage points to 45.8 percent.
Non-GAAP EPS increased 11 percent to $3.02 driven by higher revenues and higher operating margins.
Non-GAAP operating income increased 9 percent to $2,916 million and non-GAAP operating margin improved by 4.2 percentage points to 52.9 percent.
2016 total revenues guidance increased to $22.6-$22.8 billion; EPS guidance increased to $9.94-$10.11 on a GAAP basis and $11.40-$11.55 on a non-GAAP basis.
The Company generated $2.5 billion of free cash flow.
“Our business is performing well and our double-digit earnings per share growth reflects the progress we have made through our transformation efforts,” said Robert A. Bradway, chairman and chief executive officer. “We are focused on growing several newly launched products and advancing the pipeline globally.”
Product Sales Performance
Total product sales were flat for the third quarter of 2016 versus the third quarter of 2015.
Enbrel (etanercept) sales were flat as higher net selling price was offset by the impact of competition and unfavorable changes in inventory levels.
Neulasta (pegfilgrastim) sales decreased 5 percent driven by lower unit demand.
Aranesp (darbepoetin alfa) sales increased 8 percent driven mainly by higher unit demand due to a shift by some U.S. dialysis customers from EPOGEN® (epoetin alfa) to Aranesp.
Sensipar/Mimpara sales increased 18 percent driven by net selling price and higher unit demand.
XGEVA sales increased 4 percent driven by higher unit demand.
Prolia sales increased 18 percent driven by higher unit demand.
EPOGEN sales decreased 31 percent driven by the impact of competition, abnormally high purchases by a large end customer in the year ago period and a shift by some U.S. dialysis customers to Aranesp.
KYPROLIS (carfilzomib) sales increased 34 percent driven by higher unit demand.
NEUPOGEN (filgrastim) sales decreased 36 percent driven mainly by the impact of competition in the U.S.
Vectibix sales increased 24 percent driven by higher unit demand.
Nplate sales increased 10 percent driven by higher unit demand and net selling price.
Repatha (evolocumab) sales growth was driven by higher unit demand.
BLINCYTO (blinatumomab) sales increased 26 percent driven by higher unit demand.
Operating Expense, Operating Margin and Tax Rate Analysis
On a GAAP basis:
Cost of Sales margin improved by 0.1 percentage points driven primarily by manufacturing efficiencies and higher net selling price, offset partially by product mix. Research & Development (R&D) expenses decreased 12 percent driven primarily by lower spending required to support certain later-stage clinical programs and transformation and process improvement efforts. Selling, General & Administrative (SG&A) expenses were flat. Total Operating Expenses decreased 3 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.
Operating Margin improved by 3.4 percentage points to 45.8 percent.
Tax Rate increased by 1.6 percentage points due primarily to changes in the geographic mix of earnings, according to Amgen.
On a non-GAAP basis:
Cost of Sales margin improved by 0.5 percentage points driven primarily by manufacturing efficiencies and higher net selling price, offset partially by product mix. R&D expenses decreased 11 percent driven primarily by lower spending required to support certain later-stage clinical programs and transformation and process improvement efforts. SG&A expenses increased 1 percent. Total Operating Expenses decreased 5 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.
Operating Margin improved by 4.2 percentage points to 52.9 percent.
Tax Rate increased by 0.9 percentage points due primarily to changes in the geographic mix of earnings.
Cash Flow and Balance Sheet
The Company generated $2.5 billion of free cash flow in the third quarter of 2016 versus $2.8 billion in the third quarter of 2015.
The Company’s fourth quarter 2016 dividend of $1.00 per share declared on Oct. 14, 2016, will be paid on Dec. 8, 2016, to all stockholders of record as of Nov. 16, 2016.
During the third quarter, the Company repurchased 4.4 million shares of common stock at a total cost of $747 million. In October 2016, the Company’s Board of Directors approved an increase in the remaining share repurchase authorization for an aggregate authorization of $5 billion.
2016 Guidance
For the full year 2016, the Company now expects:
Total revenues in the range of $22.6 billion to $22.8 billion.
Previously, the Company expected total revenues in the range of $22.5 billion to $22.8 billion.
On a GAAP basis, EPS in the range of $9.94 to $10.11 and a tax rate in the range of 16.5 percent to 17.5 percent.
Previously, the Company expected GAAP EPS in the range of $9.55 to $9.90. Tax rate guidance is unchanged.
On a non-GAAP basis, EPS in the range of $11.40 to $11.55 and a tax rate in the range of 19.0 percent to 20.0 percent.
Previously, the Company expected non-GAAP EPS in the range of $11.10 to $11.40. Tax rate guidance is unchanged.
Capital expenditures to be approximately $700 million.
The Company provided the following updates on selected product and pipeline programs:
Repatha
In September, the Phase 3 GLAGOV study evaluating the effect of Repatha on coronary artery disease met its primary and secondary endpoints. The results will be presented Nov. 15, 2016, at the American Heart Association Scientific Sessions 2016.
Data from an event driven Phase 3 study evaluating the effects of Repatha on cardiovascular outcomes are expected in Q1 2017.
Omecamtiv mecarbil
Agreement was reached with the U.S. Food and Drug Administration (FDA) on key elements of an omecamtiv mecarbil Phase 3 cardiovascular outcomes study in chronic heart failure through a Special Protocol Assessment. Details of the protocol are being finalized with regulators and enrollment in the study is anticipated to begin in Q1 2017.
KYPROLIS
In September, a Phase 3 study evaluating an investigational regimen of KYPROLIS, melphalan and prednisone versus Velcade® (bortezomib), melphalan and prednisone for 54 weeks in newly diagnosed, transplant ineligible multiple myeloma patients did not meet the primary endpoint of superiority in progression-free survival.
A Phase 3 study of once weekly KYPROLIS administration in relapsed and refractory multiple myeloma patients has completed enrollment. The results are expected in 2017.
XGEVA
In October, a Phase 3 study evaluating XGEVA for the prevention of skeletal-related events in multiple myeloma patients met the primary endpoint of non-inferiority to zoledronic acid in delaying the time to first on-study skeletal-related event.
BLINCYTO
In August, FDA approved BLINCYTO for the treatment of pediatric patients with Philadelphia chromosome‑negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia.
Prolia
In August, a Phase 3 study evaluating Prolia compared with risedronate in patients receiving glucocorticoid treatment met primary and secondary endpoints at 12 months.
Romosozumab
In September, a Biologics License Application for the treatment of osteoporosis in postmenopausal women at increased risk for fracture was accepted for review by FDA, with a Prescription Drug User Fee target action date of July 19, 2017.
Results from an event driven active controlled Phase 3 fracture study in postmenopausal women with osteoporosis are expected in H1 2017.
Erenumab
In September, a Phase 3 study in episodic migraine prevention met its primary endpoint. Results from a second Phase 3 study in this population are expected in Q4 2016.
Parsabiv
In August, FDA issued a Complete Response Letter for the New Drug Application for the treatment of secondary hyperparathyroidism (sHPT) in adult patients with chronic kidney disease (CKD) on hemodialysis.
In September, the Committee for Medicinal Products for Human Use of the European Medicines Agency adopted a positive opinion for the Marketing Authorization of Parsabiv, recommending approval for the treatment of sHPT in adult patients with CKD on hemodialysis.
AMJEVITA (adalimumab-atto)
In September, FDA approved AMJEVITA across all eligible indications of the reference product, HUMIRA® (adalimumab), including treatment of psoriatic arthritis, ankylosing spondylitis and moderate-to-severe rheumatoid arthritis, polyarticular juvenile idiopathic arthritis (patients 4 years of age or older), chronic plaque psoriasis, adult Crohn’s disease and ulcerative colitis. AMJEVITA is the Company’s first biosimilar to receive regulatory approval in the U.S.
ABP 798 (biosimilar rituximab)
Phase 3 studies in Non-Hodgkin lymphoma and rheumatoid arthritis are currently enrolling patients.
ABP 710 (biosimilar infliximab)
A Phase 3 study in rheumatoid arthritis is currently enrolling patients.
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