On April 26, 2017 Amgen (NASDAQ:AMGN) reported financial results for the first quarter of 2017 (Press release, Amgen, APR 26, 2017, View Source [SID1234518694]). Schedule your 30 min Free 1stOncology Demo! Key results include:
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Total revenues decreased 1 percent versus the first quarter of 2016 to $5.5 billion.
GAAP earnings per share (EPS) increased 12 percent to $2.79 driven by higher operating margins.
GAAP operating income increased 8 percent to $2.6 billion and GAAP operating margin increased 4 percentage points to 49.8 percent.
Non-GAAP EPS increased 9 percent to $3.15 driven by higher operating margins.
Non-GAAP operating income increased 5 percent to $3.0 billion and non-GAAP operating margin increased 3 percentage points to 57.6 percent.
2017 EPS guidance increased to $10.64-$11.32 on a GAAP basis and $12.00-$12.60 on a non-GAAP basis; total revenues guidance unchanged at $22.3-$23.1 billion.
The Company generated $2.2 billion of free cash flow in the first quarter versus $1.8 billion in the first quarter of 2016.
"We are well positioned for the long term with our newer products demonstrating volume growth around the world and our tight operational expense management of the Company," said Robert A. Bradway, chairman and chief executive officer. "With robust Repatha (evolocumab) outcomes data, we are working with payers to improve access to this important therapy for patients at risk for heart attacks and strokes."
$Millions, except EPS and percentages
Q1’17
Q1’16
YOY Δ
Total Revenues
$ 5,464
$ 5,527
(1%)
GAAP Operating Income
$ 2,591
$ 2,402
8%
GAAP Net Income
$ 2,071
$ 1,900
9%
GAAP EPS
$ 2.79
$ 2.50
12%
Non-GAAP Operating Income
$ 2,995
$ 2,859
5%
Non-GAAP Net Income
$ 2,333
$ 2,203
6%
Non-GAAP EPS
$ 3.15
$ 2.90
9%
References in this release to "non-GAAP" measures, measures presented "on a non-GAAP basis" and to "free cash flow" (computed by subtracting capital expenditures from operating cash flow) refer to non-GAAP financial measures. Adjustments to the most directly comparable GAAP financial measures and other items are presented on the attached reconciliations.
Product Sales Performance
Total product sales decreased 1 percent for the first quarter of 2017 versus the first quarter of 2016.
Neulasta (pegfilgrastim) sales increased 2 percent as favorable changes in accounting estimates and net selling price were offset partially by lower unit demand.
Enbrel (etanercept) sales decreased 15 percent due to the impact of competition as well as lower rheumatology and dermatology segment growth compared to prior quarters.
Aranesp (darbepoetin alfa) sales decreased 4 percent as higher unit demand was more than offset by unfavorable changes in foreign exchange rates, inventory and net selling price.
Prolia (denosumab) sales increased 21 percent driven by higher unit demand.
Sensipar/Mimpara (cinacalcet) sales increased 15 percent driven primarily by net selling price.
XGEVA (denosumab) sales increased 6 percent driven by higher unit demand.
EPOGEN (epoetin alfa) sales decreased 10 percent driven by net selling price.
KYPROLIS (carfilzomib) sales increased 23 percent driven by higher unit demand.
Nplate (romiplostim) sales increased 9 percent driven by higher unit demand.
NEUPOGEN (filgrastim) sales decreased 31 percent driven primarily by the impact of competition.
Vectibix (panitumumab) sales increased 2 percent driven by higher unit demand, offset partially by unfavorable changes in foreign exchange rates.
Repatha sales increased driven by higher unit demand.
BLINCYTO (blinatumomab) sales increased 26 percent driven by higher unit demand.
Product Sales Detail by Product and Geographic Region
$Millions, except percentages
Q1’17
Q1’16
YOY Δ
US
ROW
TOTAL
TOTAL
TOTAL
Neulasta
$1,048
$162
$1,210
$1,183
2%
Enbrel
1,118
63
1,181
1,385
(15%)
Aranesp
278
233
511
532
(4%)
Prolia
279
146
425
352
21%
Sensipar / Mimpara
337
84
421
367
15%
XGEVA
298
104
402
378
6%
EPOGEN
270
0
270
300
(10%)
KYPROLIS
137
53
190
154
23%
Nplate
97
57
154
141
9%
NEUPOGEN
101
47
148
213
(31%)
Vectibix
61
86
147
144
2%
Repatha
33
16
49
16
*
BLINCYTO
23
11
34
27
26%
Other**
15
42
57
47
21%
Total product sales
$4,095
$1,104
$5,199
$5,239
(1%)
* Change in excess of 100%
** Other includes Bergamo, MN Pharma, IMLYGICand Corlanor
Operating Expense, Operating Margin and Tax Rate Analysis
On a GAAP basis:
Total Operating Expenses decreased 8 percent, with all expense categories reflecting savings from our transformation and process improvement efforts. Cost of Sales margin improved by 0.2 percentage points driven primarily by manufacturing efficiencies, offset partially by product mix. Research & Development (R&D) expenses decreased 12 percent driven by a payment in the first quarter of 2016 related to a third-party collaboration agreement, as well as lower spending required to support certain later-stage clinical programs. Selling, General & Administrative (SG&A) expenses decreased 12 percent due to the expiration of ENBREL residual royalty payments and an acquisition charge in the first quarter of 2016, offset partially by investments in product launches.
Operating Margin improved by 4 percentage points to 49.8 percent.
Tax Rate decreased 0.1 percentage points as changes in the geographic mix of earnings were offset partially by lower tax benefits from share-based compensation payments.
On a non-GAAP basis:
Total Operating Expenses decreased 7 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 manufacturing efficiencies, offset partially by product mix. R&D expenses decreased 13 percent driven by a payment in the first quarter of 2016 related to a third-party collaboration agreement, as well as lower spending required to support certain later-stage clinical programs. SG&A expenses decreased 6 percent due to the expiration of ENBREL residual royalty payments, offset partially by investments in product launches.
Operating Margin improved by 3 percentage points to 57.6 percent.
Tax Rate decreased 0.4 percentage points as changes in the geographic mix of earnings were offset partially by lower tax benefits from share-based compensation payments.
$Millions, except percentages
GAAP
Non-GAAP
Q1’17
Q1’16
YOY Δ
Q1’17
Q1’16
YOY Δ
Cost of Sales
$996
$1,018
(2%)
$682
$707
(4%)
% of product sales
19.2%
19.4%
(0.2)pts
13.1%
13.5%
(0.4) pts
Research & Development
$769
$872
(12%)
$748
$858
(13%)
% of product sales
14.8%
16.6%
(1.8) pts
14.4%
16.4%
(2) pts
Selling, General & Administrative
$1,064
$1,203
(12%)
$1,039
$1,103
(6%)
% of product sales
20.5%
23.0%
(2.5) pts
20.0%
21.1%
(1.1) pts
Other
$44
$32
38%
$0
$0
NM
TOTAL Operating Expenses
$2,873
$3,125
(8%)
$2,469
$2,668
(7%)
Operating Margin
operating income as a % of product sales
49.8%
45.8%
4 pts
57.6%
54.6%
3 pts
Tax Rate
15.8%
15.9%
(0.1) pts
18.5%
18.9%
(0.4) pts
NM: Not Meaningful
pts: percentage points
Cash Flow and Balance Sheet
The Company generated $2.2 billion of free cash flow in the first quarter of 2017 versus $1.8 billion in the first quarter of 2016 driven by the timing of tax payments and higher net income.
The Company’s second quarter 2017 dividend of $1.15 per share declared on March 7, 2017, will be paid on June 8, 2017, to all stockholders of record as of May 17, 2017.
During the first quarter, the Company repurchased 3.4 million shares of common stock at a total cost of $555 million. At the end of the first quarter, the Company had $3.5 billion remaining under its stock repurchase authorization.
$Billions, except shares
Q1’17
Q1’16
YOY Δ
Operating Cash Flow
$2.4
$1.9
$0.5
Capital Expenditures
0.2
0.2
0.0
Free Cash Flow
2.2
1.8
0.5
Dividends Paid
0.8
0.8
0.1
Share Repurchase
0.6
0.7
(0.1)
Avg. Diluted Shares (millions)
741
760
(19)
Cash and Investments
38.4
34.7
3.7
Debt Outstanding
34.1
34.3
(0.2)
Stockholders’ Equity
30.6
28.7
2.0
Note: Numbers may not add due to rounding
2017 Guidance
For the full year 2017, the Company now expects:
Total revenues in the range of $22.3 billion to $23.1 billion, unchanged from previous guidance.
On a GAAP basis, EPS in the range of $10.64 to $11.32 and a tax rate in the range of 16 percent to 18 percent.
Previously, the Company expected GAAP EPS in the range of $10.45 to $11.31. Tax rate guidance is unchanged.
On a non-GAAP basis, EPS in the range of $12.00 to $12.60 and a tax rate in the range of 18.5 percent to 19.5 percent.
Previously, the Company expected non-GAAP EPS in the range of $11.80 to $12.60. Tax rate guidance is unchanged.
Capital expenditures to be approximately $700 million.
First Quarter Product and Pipeline Update
Key development milestones:
Clinical Program
Indication
Projected Milestone
Repatha
Hyperlipidemia
Regulatory submissions (CV outcomes data)
KYPROLIS
Relapsed or refractory multiple myeloma
Phase 3 study initiation with DARZALEX Q2 ’17
XGEVA
Prevention of SREs in multiple myeloma
Regulatory reviews
EVENITY (romosozumab)†
Postmenopausal osteoporosis
July 19, 2017, PDUFA target action date in U.S.
Active controlled Phase 3 fracture data Q2 2017*
Erenumab (AMG 334)
Migraine prevention
Regulatory submissions
ABP 215
(biosimilar bevacizumab)
Oncology
Regulatory reviews
Sept. 14, 2017, BsUFA target action date in U.S.
ABP 980
(biosimilar trastuzumab)
Breast cancer
U.S. regulatory submission
†Trade name provisionally approved by FDA; CV = cardiovascular; SRE = skeletal-related event; PDUFA = Prescription Drug User Fee Act; BsUFA = Biosimilar User Fee Act; *Event driven study
The Company provided the following updates on selected product and pipeline programs:
Repatha
In February, the European Commission (EC) approved a new 420 mg single-dose delivery option for Repatha.
In March, positive Phase 3 data from a cardiovascular outcomes study and a cognitive function study were presented at the American College of Cardiology 66th Annual Scientific Session.
KYPROLIS
In February, the Phase 3 ENDEAVOR study showed KYPROLIS and dexamethasone reduced the risk of death by 21 percent and extended overall survival by an additional 7.6 months compared to Velcade (bortezomib) and dexamethasone in relapsed or refractory multiple myeloma patients.
XGEVA
In April, a supplemental Biologics License Application (sBLA) was submitted to the U.S. Food and Drug Administration (FDA) and an application for a variation to the marketing authorization was submitted to the European Medicines Agency (EMA) for the prevention of SREs in patients with multiple myeloma.
BLINCYTO
In March, FDA accepted the sBLA for priority review for BLINCYTO to include overall survival data from the Phase 3 TOWER study. The application also included new data supporting the treatment of patients with Philadelphia chromosome-positive relapsed or refractory B-cell precursor acute lymphoblastic leukemia.
EVENITY
Primary analysis of an event driven active controlled Phase 3 fracture study (ARCH) in postmenopausal women with osteoporosis is expected in Q2 2017.
Erenumab
Regulatory submissions for migraine prevention are expected in Q2 2017.
CNP520
In February, Phase 3 enrollment commenced for CNP520, a small molecule beta-site amyloid precursor protein-cleaving enzyme-1 (BACE) inhibitor for the potential treatment of Alzheimer’s disease.
Parsabiv (etelcalcetide)
In February, FDA approved Parsabiv for the treatment of secondary hyperparathyroidism (sHPT) in adult patients with chronic kidney disease (CKD) on hemodialysis.
AMG 157/MEDI9929 (tezepelumab)
In February, tezepelumab demonstrated a significant reduction in the rate of asthma exacerbations compared to placebo over the 52-week treatment period in patients with severe asthma in a Phase 2b study.
AMGEVITA (biosimilar adalimumab)
In March, EC granted marketing authorization for AMGEVITA (biosimilar adalimumab) in all available indications. AMGEVITA is authorized for the treatment of certain inflammatory diseases in adults, including moderate-to-severe rheumatoid arthritis; psoriatic arthritis; severe active ankylosing spondylitis (AS); severe axial spondyloarthritis without radiographic evidence of AS; moderate-to-severe chronic plaque psoriasis; moderate-to-severe hidradenitis suppurativa; non-infectious intermediate, posterior and panuveitis; moderate-to-severe Crohn’s disease and moderate-to-severe ulcerative colitis. The EC also approved AMGEVITA for the treatment of certain pediatric inflammatory diseases, including moderate-to-severe Crohn’s disease (ages six and older), severe chronic plaque psoriasis (ages four and older), enthesitis-related arthritis (ages six and older) and polyarticular juvenile idiopathic arthritis (ages two and older).
ABP 980 (biosimilar trastuzumab)
In March, a Marketing Authorization Application was submitted to the EMA.
Erenumab and CNP520 are developed in collaboration with Novartis AG
EVENITY trade name is provisionally approved by FDA
EVENITY is developed in collaboration with UCB globally, as well as our joint venture partner Astellas in Japan
Tezepelumab is developed in collaboration with AstraZeneca
AMGEVITA is registered in the U.S. as AMJEVITA
Velcade is a registered trademark of Millennium Pharmaceuticals, Inc.