On April 28, 2016 Amgen (NASDAQ:AMGN) reported financial results for the first quarter of 2016 (Press release, Amgen, APR 28, 2016, View Source [SID:1234511563]). Schedule your 30 min Free 1stOncology Demo! Key results include:
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Total revenues increased 10 percent versus the first quarter of 2015 to $5,527 million, with 7 percent product sales growth driven by Enbrel (etanercept), Prolia (denosumab), Aranesp (darbepoetin alfa), Neulasta (pegfilgrastim), Kyprolis (carfilzomib) and XGEVA (denosumab).
Adjusted EPS grew 17 percent versus the first quarter of 2015 to $2.90 driven by higher revenues and higher operating margins.
Adjusted operating income increased 17 percent to $2,859 million and adjusted operating margin improved by 4.4 percentage points to 54.6 percent.
GAAP EPS were $2.50 compared to $2.11 and GAAP operating income was $2,402 million compared to $2,022 million.
Free cash flow was $1.8 billion compared to $1.4 billion in the first quarter of 2015 driven by higher revenues and higher operating income.
"We are off to a strong start in 2016 delivering results for the year and laying groundwork for our long-term growth with innovative new product launches globally," said Robert A. Bradway, chairman and chief executive officer.
$MILLIONS, EXCEPT EPS AND PERCENTAGES
Q1’16
Q1’15
YOY Δ
Total Revenues
$ 5,527
$ 5,033
10%
Adjusted Operating Income
$ 2,859
$ 2,449
17%
Adjusted Net Income
$ 2,203
$ 1,911
15%
Adjusted EPS
$ 2.90
$ 2.48
17%
GAAP Operating Income
$ 2,402
$ 2,022
19%
GAAP Net Income
$ 1,900
$ 1,623
17%
GAAP EPS
$ 2.50
$ 2.11
18%
REFERENCES IN THIS RELEASE TO "ADJUSTED" MEASURES, MEASURES PRESENTED "ON AN ADJUSTED BASIS" AND TO FREE CASH FLOW REFER TO NON-GAAP FINANCIAL MEASURES. THESE ADJUSTMENTS AND OTHER ITEMS ARE PRESENTED ON THE ATTACHED RECONCILIATIONS.
Product Sales Performance
Total product sales increased 7 percent for the first quarter of 2016 versus the first quarter of 2015. The increase was driven by ENBREL, Prolia, Aranesp, Neulasta, Kyprolis and XGEVA.
ENBREL sales increased 24 percent driven by net selling price and declining inventory levels in the prior year period, offset partially by the impact of competition.
Neulasta sales increased 4 percent driven by both higher unit demand and net selling price in the United States (U.S.).
Aranesp sales increased 11 percent. Unit demand grew due to a shift by some U.S. dialysis customers from EPOGEN (epoetin alfa) to Aranesp. Unit demand growth was offset partially by unfavorable changes in net selling price.
XGEVA sales increased 11 percent driven by higher unit demand.
Sensipar/Mimpara (cinacalcet) sales increased 10 percent driven by net selling price and higher unit demand, offset partially by unfavorable changes in inventory levels.
Prolia sales increased 29 percent driven by higher unit demand.
EPOGEN sales decreased 44 percent driven by the impact of competition and, to a lesser extent, a shift by some U.S. dialysis customers to Aranesp.
NEUPOGEN (filgrastim) sales decreased 13 percent driven by the impact of competition in the U.S.
Kyprolis sales increased 43 percent driven by higher unit demand.
Vectibix (panitumumab) sales increased 18 percent driven by higher unit demand.
Nplate (romiplostim) sales increased 12 percent driven by higher unit demand.
BLINCYTO (blinatumomab) sales increased 80 percent driven by higher unit demand.
PRODUCT SALES DETAIL BY PRODUCT AND GEOGRAPHIC REGION
$Millions, except percentages
Q1’16
Q1’15
YOY Δ
US
ROW
TOTAL
TOTAL
TOTAL
Enbrel
$1,326
$59
$1,385
$1,116
24%
Neulasta
996
187
1,183
1,134
4%
Aranesp
261
271
532
480
11%
XGEVA
271
107
378
340
11%
Sensipar / Mimpara
278
89
367
334
10%
Prolia
221
131
352
272
29%
EPOGEN
300
0
300
534
(44%)
NEUPOGEN
150
63
213
246
(13%)
Kyprolis
129
25
154
108
43%
Vectibix
56
88
144
122
18%
Nplate
86
55
141
126
12%
BLINCYTO
21
6
27
15
80%
Repatha
14
2
16
0
*
Other**
10
37
47
47
0%
Total product sales
$4,119
$1,120
$5,239
$4,874
7%
* Not meaningful
** Other includes MN Pharma, Bergamo, IMLYGIC and Corlanor
Operating Expense, Operating Margin and Tax Rate Analysis, on an Adjusted Basis
Cost of Sales margin improved by 1.6 percentage points driven by manufacturing efficiencies, higher net selling price and lower royalties.
Research & Development (R&D) expenses were flat.
Selling, General & Administrative (SG&A) expenses increased 11 percent driven by investments in new product launches.
Operating Expenses increased 3 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.
Operating Margin improved by 4.4 percentage points to 54.6 percent.
Tax Rate increased 1.9 percentage points due to changes in the geographic mix of earnings and the prior year benefit of a state tax audit settlement, offset partially by the benefit in the first quarter of 2016 of adopting the new Accounting Standard Update 2016-09, Improvements to Employee Share-Based Payment Accounting.
$MILLIONS, EXCEPT PERCENTAGES
On an Adjusted Basis
Q1’16
Q1’15
YOY Δ
Cost of Sales*
$707
$735
(4%)
% of sales
13.5%
15.1%
(1.6) pts.
Research & Development
$858
$856
0%
% of sales
16.4%
17.6%
(1.2) pts.
Selling, General & Administrative
$1,103
$993
11%
% of sales
21.1%
20.4%
0.7 pts.
TOTAL Operating Expenses
$2,668
$2,584
3%
Operating Margin
operating income as a % of sales
54.6%
50.2%
4.4 pts.
Tax Rate*
18.9%
17.0%
1.9 pts.
pts: percentage points
*
Impact of Puerto Rico excise tax is included in Cost of Sales and Tax Rate. Excluding Puerto Rico excise tax, Cost of Sales would be 1.7 pts. and 1.9 pts. lower for 2016 and 2015, respectively; and the Tax Rate would be 2.4 pts. and 2.8 pts. higher for 2016 and 2015, respectively.
Cash Flow and Balance Sheet
The Company generated $1.8 billion of free cash flow in the first quarter of 2016 versus $1.4 billion in the first quarter of 2015 driven by higher revenues and higher operating income.
The Company’s second quarter 2016 dividend of $1.00 per share declared on March 2, 2016, will be paid on June 8, 2016, to all stockholders of record as of May 17, 2016.
During the first quarter, the Company repurchased 4.7 million shares of common stock at a total cost of $690 million. At the end of the first quarter, the Company had $4.2 billion remaining under its stock repurchase authorization.
$BILLIONS, EXCEPT SHARES
Q1’16
Q1’15
YOY Δ
Operating Cash Flow
$1.9
$1.5
$0.4
Capital Expenditures
0.2
0.1
0.0
Free Cash Flow
1.8
1.4
0.4
Dividends Paid
0.8
0.6
0.2
Share Repurchase
0.7
0.5
0.2
Avg. Diluted Shares (millions)
760
770
(10)
Cash and Investments
34.7
27.1
7.6
Debt Outstanding
34.3
30.2
4.1
Stockholders’ Equity
28.7
26.5
2.2
Note: Numbers may not add due to rounding
2016 Guidance
For the full year 2016, the Company now expects:
Total revenues in the range of $22.2 billion to $22.6 billion and adjusted EPS in the range of $10.85 to $11.20. Previously, the Company expected total revenues in the range of $22.0 billion to $22.5 billion and adjusted EPS in the range of $10.60 to $11.00.
Adjusted tax rate in the range of 19 percent to 20 percent.
Capital expenditures to be approximately $700 million.
FIRST QUARTER PRODUCT AND PIPELINE UPDATE
Key 2016 development milestones:
Clinical Program
Indication
Milestone
Repatha (evolocumab)
Hyperlipidemia
Phase 3 coronary imaging data expected H2
Phase 3 CV outcomes data expected H2*
Kyprolis
Relapsed multiple myeloma
EU regulatory review (ENDEAVOR)
Parsabiv (etelcalcetide)†
Secondary hyperparathyroidism
Global regulatory reviews
XGEVA
Prevention of SREs in multiple myeloma
Phase 3 data expected H2*
AMG 334
Migraine Prophylaxis
Phase 2b chronic migraine data expected mid-year
Phase 3 episodic migraine data expected H2
ABP 215
(biosimilar bevacizumab)
Oncology
Global regulatory submissions expected
ABP 501
(biosimilar adalimumab)
Inflammatory diseases
Global regulatory reviews
ABP 980
(biosimilar trastuzumab)
Breast Cancer
Phase 3 data expected H2
*EVENT DRIVEN STUDY; †TRADE NAME PROVISIONALLY APPROVED BY FDA; CV = CARDIOVASCULAR
The Company provided the following updates on selected product and pipeline programs:
Repatha
In February, a Phase 3 study evaluating Repatha in patients with high cholesterol who cannot tolerate statins met the co-primary endpoints: the mean percent reductions from baseline in low-density lipoprotein cholesterol (LDL-C) at weeks 22 and 24, and the percent reduction from baseline in LDL-C at week 24.
BLINCYTO
In March, a supplemental Biologics License Application (sBLA) was submitted to the U.S. Food and Drug Administration (FDA) for the treatment of pediatric and adolescent patients with Philadelphia chromosome-negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia (ALL).
In February, a Phase 3 open-label study evaluating the efficacy of BLINCYTO versus standard of care in adult patients with Philadelphia chromosome-negative relapsed or refractory B-cell precursor ALL met the primary endpoint of improved overall survival at a prespecified interim analysis.
IMLYGIC (talimogene laherparepvec)
In February, enrollment initiated for a Phase 3 study evaluating IMLYGIC in combination with KEYTRUDA (pembrolizumab) in patients with unresectable metastatic melanoma.
XGEVA
In March, enrollment completed for a Phase 3 event-driven study evaluating XGEVA compared with zoledronic acid for the prevention of skeletal-related events in patients with newly diagnosed multiple myeloma. Data from the study are expected in H2 2016.
ENBREL
In March, an sBLA for the treatment of pediatric patients with chronic severe plaque psoriasis was accepted for review by FDA.
Romosozumab
In March, a Phase 3 study evaluating romosozumab in men with osteoporosis met the primary endpoint by increasing bone mineral density at the lumbar spine at 12 months.
In February, a Phase 3 study evaluating romosozumab in postmenopausal women with osteoporosis met the co-primary endpoints by reducing the incidence of new vertebral fracture through months 12 and 24. The study also met a secondary endpoint by reducing the incidence of clinical fractures through 12 months.
AMG 334
Data from a Phase 2b study in patients with chronic migraine are expected mid-year 2016.
Data from two Phase 3 studies in patients with episodic migraine are expected in H2 2016.
Romosozumab is developed in collaboration with UCB globally, as well as Astellas in Japan
AMG 334 is developed in collaboration with Novartis
KEYTRUDA is a registered trademark of Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc.
Non-GAAP Financial Measures
In this news release, management has presented its operating results for the first quarters of 2016 and 2015 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 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 first quarters of 2016 and 2015. 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 news 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.