On July 26, 2018 Amgen (NASDAQ:AMGN) reported financial results for the second quarter of 2018. Key results include (Press release, Amgen, JUL 26, 2018, View Source;p=RssLanding&cat=news&id=2360351 [SID1234527895]):
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Total revenues increased 4 percent versus the second quarter of 2017 to $6.1 billion.
Product sales grew 2 percent globally. 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 20 percent to $3.48 driven by higher product sales, a lower tax rate and lower weighted-average shares outstanding.
GAAP operating income increased 5 percent to $2.8 billion and GAAP operating margin increased 1.5 percentage points to 49.9 percent.
Non-GAAP EPS increased 17 percent to $3.83 driven by higher product sales, a lower tax rate and lower weighted-average shares outstanding.
Non-GAAP operating income increased 2 percent to $3.1 billion and non-GAAP operating margin decreased 0.1 percentage points to 55.1 percent.
2018 EPS guidance revised to $11.83-$12.62 on a GAAP basis and $13.30-$14.00 on a non-GAAP basis; total revenues guidance revised to $22.5-$23.2 billion.
The Company generated $1.9 billion of free cash flow in the second quarter versus $2.1 billion in the second quarter of 2017.
Product Sales Performance
Total product sales increased 2 percent for the second quarter of 2018 versus the second quarter of 2017.
Repatha sales increased 78 percent driven primarily by higher unit demand, offset partially by net selling price.
BLINCYTO (blinatumomab) sales increased 40 percent driven by higher unit demand.
KYPROLIS sales increased 25 percent driven by higher unit demand, offset partially by net selling price.
Prolia sales increased 21 percent driven primarily by higher unit demand and, to a lesser extent, net selling price.
XGEVA sales increased 14 percent driven primarily by higher unit demand and, to a lesser extent, net selling price.
Nplate (romiplostim) sales increased 9 percent driven by higher unit demand, offset partially by net selling price.
Vectibix (panitumumab) sales increased 3 percent driven primarily by higher unit demand, offset partially by net selling price.
Neulasta (pegfilgrastim) sales increased 1 percent driven by an increase in net selling price and, to a lesser extent, favorable changes in inventory, offset partially by lower unit demand.
Sensipar/Mimpara (cinacalcet) sales decreased 2 percent driven by unfavorable changes in inventory and lower unit demand as a function of Parsabiv uptake, offset partially by higher net selling price.
Parsabiv (etelcalcetide) was launched in the U.S. in the first quarter of 2018.
Enbrel (etanercept) sales decreased 11 percent driven primarily by unfavorable changes in inventory and lower unit demand.
Aranesp (darbepoetin alfa) sales decreased 12 percent driven primarily by the impact of competition on unit demand and, to a lesser extent, net selling price.
EPOGEN (epoetin alfa) sales decreased 14 percent driven primarily by lower net selling price and, to a lesser extent, lower unit demand.
NEUPOGEN (filgrastim) sales decreased 26 percent driven primarily by the impact of competition on unit demand and, to a lesser extent, net selling price.
Operating Expense, Operating Margin and Tax Rate Analysis
On a GAAP basis:
Total Operating Expenses increased 4 percent due to investments in newer and recently launched products, and all expense categories also reflect savings from our transformation and process improvement efforts. Cost of Sales margin decreased by 0.4 points due to favorable royalty cost and lower acquisition-related intangible amortization, partially offset by higher manufacturing cost and unfavorable product mix. Research & Development (R&D) expenses were flat. Selling, General & Administrative (SG&A) expenses increased 12 percent due to investments in product launches and marketed product support.
Operating Margin improved by 1.5 percentage points to 49.9 percent.
Tax Rate decreased by 2.1 percentage points due to the impacts of U.S. corporate tax reform, offset partially by a prior year benefit associated with the effective settlement of certain state and federal tax matters.
On a non-GAAP basis:
Total Operating Expenses increased 7 percent due to investments in newer and recently launched products, and all expense categories also reflect savings from our transformation and process improvement efforts. Cost of Sales margin increased by 0.4 points driven by higher manufacturing cost and unfavorable product mix, partially offset by lower royalty expense. R&D expenses were flat. SG&A expenses increased 14 percent due to investments in product launches and marketed product support.
Operating Margin decreased by 0.1 percentage points to 55.1 percent.
Tax Rate decreased by 3.2 percentage points due to the impacts of U.S. corporate tax reform, offset partially by a prior year benefit associated with the effective settlement of certain state and federal tax matters.
Cash Flow and Balance Sheet
The Company generated $1.9 billion of free cash flow in the second quarter of 2018 versus $2.1 billion in the second quarter of 2017 driven by higher cash taxes resulting from the first installment of the repatriation tax paid in the second quarter of 2018, partially offset by a lower ongoing income tax liability as well as higher net income.
The Company’s second quarter 2018 dividend of $1.32 per share was paid on June 8, 2018, a 15 percent increase versus the second quarter of 2017.
During the second quarter, the Company repurchased 18.2 million shares of common stock at a total cost of $3.2 billion. At the end of the second quarter, the Company had $5.4 billion remaining under its stock repurchase authorization.
2018 Guidance
For the full year 2018, the Company now expects:
Total revenues in the range of $22.5 billion to $23.2 billion.
Previously, the Company expected total revenues in the range of $21.9 billion to $22.8 billion.
On a GAAP basis, EPS in the range of $11.83 to $12.62 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 $11.30 to $12.28. Tax rate guidance is unchanged.
On a non-GAAP basis, EPS in the range of $13.30 to $14.00 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 $12.80 to $13.70. Tax rate guidance is unchanged.
Capital expenditures to be approximately $750 million.
Second Quarter Product and Pipeline Update
The Company provided the following updates on selected product and pipeline programs:
AimovigTM (erenumab-aooe)
In May, the U.S. Food and Drug Administration (FDA) approved Aimovig for the preventive treatment of migraine in adults.
In June, the Company submitted a supplemental Biologics License Application (BLA) to the FDA for the 140 mg Sureclick autoinjector device and 140 mg prefilled syringe.
KYPROLIS
In April, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion recommending a label variation for KYPROLIS to include the overall survival (OS) data from the Phase 3 ASPIRE trial.
In June, the FDA approved the supplemental New Drug Application to add the OS data from the Phase 3 ASPIRE trial to the U.S. Prescribing Information.
BLINCYTO
In June, the European Commission (EC) granted a full marketing authorization for BLINCYTO based on the OS data from the Phase 3 TOWER study in adult patients with Philadelphia chromosome-negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia.
Repatha
In May, the EC approved a new indication for adults with established atherosclerotic cardiovascular disease (myocardial infarction, stroke or peripheral arterial disease) to reduce cardiovascular risk by lowering lipoprotein cholesterol (LDL-C) levels.
Prolia
In May and June, the FDA and EC, respectively, approved a new indication for the treatment of glucocorticoid-induced osteoporosis in adults.
EVENITYTM (romosozumab)
In July, Amgen and UCB announced the resubmission of the BLA to the FDA for the treatment of osteoporosis in postmenopausal women at high risk for fracture.
KANJINTITM (ABP 980)
In May, the EC granted marketing authorization for KANJINTI, a biosimilar to Herceptin (trastuzumab), for the treatment of HER2-positive metastatic breast cancer, HER2-positive early breast cancer and HER2-positive metastatic adenocarcinoma of the stomach or gastroesophageal junction.
In May, the Company received a complete response letter from the FDA on its BLA.
ABP 710 (biosimilar infliximab)
In June, the Company announced results from the primary analysis of a Phase 3 study evaluating the efficacy and safety of biosimilar candidate ABP 710 compared with REMICADE (infliximab) in patients with moderate-to-severe rheumatoid arthritis. The results confirm noninferiority compared to infliximab but could not rule out superiority based on the primary efficacy endpoint.
Amgen Announces Succession Plans for Two Executive Officers
As part of Amgen’s planned executive succession to address upcoming retirements, the Company announced that Sean E. Harper, M.D., executive vice president of Research and Development, will be retiring from his current role at Amgen and will be succeeded by David M. Reese, M.D., currently senior vice president of Translational Sciences and Oncology at Amgen. The Company also announced that Anthony C. Hooper, executive vice president of Global Commercial Operations, will be retiring from his current role in September and will be succeeded by Murdo Gordon, chief commercial officer of Bristol-Myers Squibb Company. Details of these plans are the subject of a separate Amgen press release.
EVENITY 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
Remicade is a registered trademark of Johnson and Johnson
Non-GAAP Financial Measures
In this news release, management has presented its operating results for the second 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 second 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.