On July 30, 2019 Amgen (NASDAQ:AMGN) reported financial results for the second quarter of 2019 (Press release, Amgen, JUL 30, 2019, View Source [SID1234537883]). Key results include:
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Total revenues decreased 3% to $5.9 billion in comparison to the second quarter of 2018 reflecting increasing competition due to patent expirations.
Product sales declined 2% globally. Prolia (denosumab), Repatha (evolocumab), Parsabiv (etelcalcitide) and Aimovig (erenumab-aooe) units grew double-digits or better.
GAAP earnings per share (EPS) increased 3% to $3.57 benefited by lower weighted-average shares outstanding.
GAAP operating income decreased 5% to $2.7 billion and GAAP operating margin decreased 1.9 percentage points to 48.0%.
Non-GAAP EPS increased 4% to $3.97 benefited by lower weighted-average shares outstanding.
Non-GAAP operating income decreased 5% to $3.0 billion and non-GAAP operating margin decreased 1.8 percentage points to 53.3%.
The Company generated $1.3 billion of free cash flow in the second quarter versus $1.9 billion in the second quarter of 2018 driven primarily by an advanced tax deposit payment.
2019 total revenues guidance revised to $22.4-$22.9 billion; EPS guidance to $12.10-$12.71 on a GAAP basis and $13.75-$14.30 on a non-GAAP basis
Product Sales Performance
Total product sales decreased 2% for the second quarter of 2019 versus the second quarter of 2018.
Prolia sales increased 14% driven by higher unit demand.
EVENITY (romosozumab-aqqg) generated $28 million of sales in the second quarter of 2019.
Repatha sales increased 3% driven by higher unit demand, offset partially by net selling price.
Aimovig was launched in the U.S. in the second quarter of 2018 and generated $83 million in sales in the second quarter of 2019.
Parsabiv sales increased 130% driven by higher unit demand, offset partially by net selling price.
KYPROLIS (carfilzomib) sales increased 2% driven by higher unit demand.
XGEVA (denosumab) sales increased 10% driven primarily by higher unit demand.
Vectibix (panitumumab) sales increased 13% driven by higher unit demand.
Nplate (romiplostim) sales increased 12% driven by higher unit demand.
BLINCYTO (blinatumomab) sales increased 30% driven by higher unit demand.
Biosimilar sales generated $82 million in the second quarter of 2019.
Enbrel (etanercept) sales increased 5% driven primarily by net selling price and favorable changes in inventory levels, offset partially by lower unit demand.
Neulasta (pegfilgrastim) sales decreased 25% driven by lower net selling price and the impact of biosimilar competition on unit demand.
NEUPOGEN (filgrastim) sales decreased 26% driven primarily by the impact of competition on unit demand and lower net selling price, offset partially by favorable changes in accounting estimates of sales deductions.
EPOGEN (epoetin alfa) sales decreased 11% driven by lower net selling price.
Aranesp (darbepoetin alfa) sales decreased 8% driven by the impact of competition on unit demand.
Sensipar/Mimpara (cinacalcet) sales decreased 71% driven by the impact of generic competition on unit demand.
Operating Expense, Operating Margin and Tax Rate Analysis
On a GAAP basis:
Total Operating Expenses decreased 1%. Cost of Sales margin increased 0.2 percentage points due primarily to product mix, offset partially by the benefit of Hurricane Maria insurance proceeds and lower manufacturing costs. Research & Development (R&D) expenses increased 6% driven primarily by increased spending in research and early pipeline in support of our oncology programs, offset partially by decreased spending in support of marketed products. Selling, General & Administrative (SG&A) expenses decreased 7% driven primarily by reduced discretionary general and administrative expenses and the end of certain acquisition-related intangible asset amortization charges in 2018.
Operating Margin decreased 1.9 percentage points to 48.0%.
Tax Rate increased 1.7 percentage points due primarily to a prior-year tax benefit associated with intercompany sales under U.S. corporate tax reform.
AMGEN REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS
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On a non-GAAP basis:
Total Operating Expenses decreased 1%. Cost of Sales margin increased 0.1 percentage points due primarily to product mix, offset partially by the benefit of Hurricane Maria insurance proceeds and lower manufacturing costs. R&D expenses increased 7% driven primarily by increased spending in research and early pipeline in support of our oncology programs, offset partially by decreased spending in support of marketed products. Selling, General & Administrative (SG&A) expenses decreased 6% driven primarily by reduced discretionary general and administrative expenses.
Operating Margin decreased 1.8 percentage points to 53.3%.
Tax Rate increased 1.1 percentage points due primarily to a prior-year tax benefit associated with intercompany sales under U.S. corporate tax reform.
Cash Flow and Balance Sheet
The Company generated $1.3 billion of free cash flow in the second quarter of 2019 versus $1.9 billion in the second quarter of 2018 driven primarily by an advanced tax deposit payment.
The Company’s second quarter 2019 dividend of $1.45 per share was declared on March 7, 2019, and was paid on June 7, 2019, to all stockholders of record as of May 17, 2019, representing a 10% increase from 2018.
During the second quarter, the Company repurchased 13.1 million shares of common stock at a total cost of $2.3 billion. At the end of the second quarter, the Company had $4.7 billion remaining under its stock repurchase authorization
al revenues in the range of $22.4 billion to $22.9 billion.
Previously, the Company expected total revenues in the range of $22.0 billion to $22.9 billion.
On a GAAP basis, EPS in the range of $12.10 to $12.71 and a tax rate in the range of 13% to 14%.
Previously, the Company expected GAAP EPS in the range of $11.68 to $12.73 and a tax rate in the range of 13% to 14%.
On a non-GAAP basis, EPS in the range of $13.75 to $14.30 and a tax rate in the range of 14% to 15%.
Previously, the Company expected non-GAAP EPS in the range of $13.25 to $14.30 and a tax rate in the range of 14% to 15%.
Capital expenditures to be approximately $700 million.
Second Quarter Product and Pipeline Update
The Company provided the following updates on selected product and pipeline programs:
Research
In June, Intermountain Healthcare and deCODE genetics, a wholly-owned subsidiary of Amgen based in Iceland, announced a global collaboration that combines Intermountain’s internationally-recognized expertise in precision medicine and clinical care with deCODE’s world-class expertise in human population genetics and will involve the participation of up to half a million individuals.
In July, the Company completed the acquisition of Nuevolution, and is rapidly integrating its world-class DNA-encoded library and other technologies.
Omecamtiv mecarbil
In July, the Phase 3 GALACTIC-HF cardiovascular outcomes clinical trial completed enrollment.
ny discussed long-term efficacy and safety data recently presented at the meetings of the American Academy of Neurology and American Headache Society.
AMG 510
The Company provided a clinical update, including tumor responses in colorectal and appendiceal cancer patients, completion of enrollment in the dose expansion arm and enrollment initiation in the checkpoint inhibitor combination arm of the first-in-human study. Initiation of a potentially registrational monotherapy study is planned for this year.
ABP 798 (biosimilar rituximab)
Results from a Phase 3 study of ABP 798, a biosimilar candidate to Rituxan (rituximab), in patients with Non-Hodgkin’s lymphoma are expected in Q3 2019.
ABP 710 (biosimilar infliximab)
The Company announced that the U.S. Food and Drug Administration (FDA) has set a Dec. 14, 2019, Biosimilar User Fee Act target action date for the Biologics License Application of ABP 710, a biosimilar candidate to REMICADE (infliximab).
Omecamtiv mecarbil is being developed under a collaboration between Amgen and Cytokinetics, with funding and strategic support from Servier
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
Rituxan is a registered trademark of Genentech
REMICADE is a registered trademark of Johnson and Johnson
AMGEN REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS
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Non-GAAP Financial Measures
In this news release, management has presented its operating results for the second quarters of 2019 and 2018, in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2019 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 2019 and 2018. 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.