The FINANCIAL — Amgen on October 28 announced financial results for the third quarter of 2015. Key results include:
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). Unfavorable changes in foreign exchange rates impacted total revenue and product sales growth by 2 percentage points, according to Amgen.
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.
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.
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.
Phase 2 data in patients with chronic heart failure showed statistically significant improvements in several pre-specified measures of cardiac function.
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.
The CHMP issued a positive opinion recommending marketing authorization for the treatment of Philadelphia chromosome-negative B-precursor relapsed or refractory acute lymphoblastic leukemia.
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.