On October 29, 2019 Amgen (NASDAQ:AMGN) reported financial results for the third quarter of 2019 (Press release, Amgen, OCT 29, 2019, View Source [SID1234549961]). Key results include:
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Total revenues decreased 3% to $5.7 billion in comparison to the third quarter of 2018, reflecting the impact of biosimilar and generic competition against key products.
Although product sales declined 1% globally, units grew double digits or better for Prolia (denosumab), Repatha (evolocumab), Aimovig (erenumab-aooe), Parsabiv (etelcalcetide), KYPROLIS (carfilzomib) and BLINCYTO (blinatumomab).
GAAP earnings per share (EPS) increased 14% to $3.27 benefited by lower weighted-average shares outstanding and higher operating income.
GAAP operating income increased 7% to $2.5 billion and GAAP operating margin increased 3.1 percentage points to 45.3%.
Non-GAAP EPS decreased 1% to $3.66 as a result of lower revenue, offset partially by lower weighted-average shares outstanding.
Non-GAAP operating income decreased 6% to $2.8 billion and non-GAAP operating margin decreased 2.8 percentage points to 51.1%.
The Company generated $3.2 billion of free cash flow in the third quarter of 2019 versus $3.1 billion in the third quarter of 2018.
2019 total revenues guidance revised to $22.8-$23.0 billion; EPS guidance to $12.50-$12.80 on a GAAP basis and $14.20-$14.45 on a non-GAAP basis. This guidance excludes the impact of the Otezla (apremilast) acquisition.
The Company expects the Otezla acquisition to close before the end of the fourth quarter.
Product Sales Performance
Total product sales decreased 1% for the third quarter of 2019 versus the third quarter of 2018.
Prolia sales increased 18% driven by higher unit demand.
EVENITY (romosozumab-aqqg) was launched in the first half of this year and generated $59 million of sales in the third quarter of 2019.
Repatha sales increased 40% driven by higher unit demand, offset partially by lower net selling price.
Aimovig generated $66 million in sales in the third quarter of 2019.
Parsabiv sales increased 54% driven by higher unit demand, offset partially by lower net selling price.
KYPROLIS sales increased 15% driven primarily by higher unit demand.
XGEVA (denosumab) sales increased 10% driven primarily by higher unit demand.
Vectibix (panitumumab) sales increased 8% driven primarily by higher unit demand.
Nplate (romiplostim) sales increased 10% driven primarily by higher unit demand.
BLINCYTO sales increased 47% driven by higher unit demand.
Biosimilar sales generated $173 million in the third quarter of 2019.
Enbrel (etanercept) sales increased 6% driven by higher net selling price and favorable changes in accounting estimates, offset partially by lower unit demand.
Neulasta (pegfilgrastim) sales decreased 32% driven by the impact of biosimilar competition on unit demand and lower net selling price.
NEUPOGEN (filgrastim) sales decreased 36% driven primarily by lower net selling price, unfavorable changes in accounting estimates and the impact of biosimilar competition on unit demand.
EPOGEN (epoetin alfa) sales decreased 15% driven primarily by lower net selling price.
Aranesp (darbepoetin alfa) sales decreased 5% driven primarily by the impact of competition on unit demand.
Sensipar/Mimpara (cinacalcet) sales decreased 73% 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 9%. Cost of Sales margin increased 0.2 percentage points due primarily to unfavorable product mix, offset partially by lower manufacturing costs. Research & Development (R&D) expenses increased 8% 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 5% driven primarily by lower general and administrative expenses as well as the end of certain amortization of intangible assets in 2018. Other operating expenses decreased due primarily to an impairment charge in the prior period associated with a nonkey intangible asset acquired in a business combination.
Operating Margin increased 3.1 percentage points to 45.3%.
Tax Rate increased 2.4 percentage points due primarily to a prior-year tax benefit associated with intercompany sales under U.S. corporate tax reform.
AMGEN REPORTS THIRD QUARTER 2019 FINANCIAL RESULTS
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On a non-GAAP basis:
Total Operating Expenses were flat. Cost of Sales margin increased 0.1 percentage points due primarily to unfavorable product mix, offset partially by lower manufacturing costs. R&D expenses increased 8% 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. SG&A expenses decreased 5% driven primarily by lower general and administrative expenses.
Operating Margin decreased 2.8 percentage points to 51.1%.
Tax Rate increased 2.2 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 $3.2 billion of free cash flow in the third quarter of 2019 versus $3.1 billion in the third quarter of 2018 driven primarily by favorable changes in working capital.
The Company’s third quarter 2019 dividend of $1.45 per share was declared on Aug. 2, 2019, and was paid on Sept. 6, 2019, to all stockholders of record as of Aug. 15, 2019, representing a 10% increase from 2018.
During the third quarter of 2019, the Company repurchased 6.2 million shares of common stock at a total cost of $1.2 billion. At the end of the third quarter, the Company had $3.6 billion remaining under its stock repurchase authorization.
2019 Guidance
For the full year 2019, the Company now expects:
Total revenues in the range of $22.8 billion to $23.0 billion.
Previously, the Company expected total revenues in the range of $22.4 billion to $22.9 billion.
On a GAAP basis, EPS in the range of $12.50 to $12.80 and a tax rate in the range of 13% to 14%.
Previously, the Company expected GAAP EPS in the range of $12.10 to $12.71 and a tax rate in the range of 13% to 14%.
On a non-GAAP basis, EPS in the range of $14.20 to $14.45 and a tax rate in the range of 14% to 15%.
Previously, the Company expected non-GAAP EPS in the range of $13.75 to $14.30 and a tax rate in the range of 14% to 15%.
Capital expenditures to be approximately $650 million.
2019 Guidance does not include the Otezla acquisition which is expected to close by the end of the fourth quarter.
AMGEN REPORTS THIRD QUARTER 2019 FINANCIAL RESULTS
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Third Quarter Product and Pipeline Update
The Company provided the following updates on selected product and pipeline programs:
Research
In September, the Company announced that it joined a consortium to perform the whole genome sequencing of approximately 500,000 participants in the UK Biobank. deCODE Genetics, a wholly-owned subsidiary of Amgen, will provide the whole genome sequencing for the project, along with the Wellcome Sanger Institute.
Tezepelumab
A Phase 3 Study evaluating the efficacy and safety of tezepelumab in adults and adolescents with severe uncontrolled asthma has completed enrollment, with the primary analysis expected in late 2020.
A Phase 2 study evaluating the efficacy and safety of tezepelumab in adults with moderate to very severe chronic obstructive pulmonary disease is enrolling patients.
AMG 570
A Phase 2 study of AMG 570, a bispecific inhibitor of ICOSL and BAFF, is enrolling patients with systemic lupus erythematosus.
EVENITY
In October, the Committee for Medicinal Products for Human Use of the European Medicines Agency adopted a positive opinion recommending Marketing Authorization for EVENITY for the treatment of severe osteoporosis in postmenopausal women at high risk of fracture, with a contraindication for patients with a history of myocardial infarction or stroke.
KYPROLIS
In September, the Phase 3 CANDOR study evaluating KYPROLIS in combination with dexamethasone and DARZALEX (daratumumab) (KdD) compared to KYPROLIS and dexamethasone alone (Kd) met its primary endpoint of progression-free survival (PFS), demonstrating a 37% reduction in the risk of disease progression or death in patients with relapsed or refractory multiple myeloma treated with KdD. The median PFS for patients treated with Kd alone was 15.8 months, while the median PFS for patients treated with KdD had not been reached by the cut-off date.
BLINCYTO
In September, an open-label, randomized, controlled global multicenter Phase 3 trial evaluating BLINCYTO compared to conventional consolidation chemotherapy in pediatric patients with high-risk, B-cell acute lymphoblastic leukemia (ALL) at first relapse met its primary endpoint of event-free survival at a prespecified interim analysis.
In September, an open-label, randomized, controlled multicenter Phase 3 trial in Australia, Canada, New Zealand and the U.S. conducted by the Children’s Oncology Group (COG) in pediatric B-cell ALL patients at first relapse closed to accrual for the high-risk and intermediate risk-arm based on the recommendation of the COG Data Monitoring Committee. The closure decision was based on a strong trend towards improved disease-free survival and improved overall survival, markedly lower toxicity and better minimal residual disease clearance for BLINCYTO compared to chemotherapy.
AMGEN REPORTS THIRD QUARTER 2019 FINANCIAL RESULTS
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Nplate
In October, the U.S. Food and Drug Administration approved a Supplemental Biologics License Application for Nplate to include new data in its U.S. prescribing information showing sustained platelet responses in adults with immune thrombocytopenia. The updated indication expands treatment to newly diagnosed and persistent adult ITP patients who have had an insufficient response to corticosteroids, immunoglobulins or splenectomy.
A Phase 3 trial evaluating Nplate for the treatment of chemotherapy-induced thrombocytopenia in patients receiving chemotherapy for the treatment of non-small cell lung cancer, ovarian cancer or breast cancer is enrolling patients.
AMG 510
The Company discussed clinical data from the first-in-human study that was presented at medical conferences in Q3.
The Phase 2 non-small cell lung cancer monotherapy study continues to enroll patients.
Initial cohort of colorectal cancer patients has been enrolled at the target dose in a Phase 2 monotherapy study, and as the data mature, the Company will determine the development path for colorectal cancer.
The next clinical data update for AMG 510 is expected in 2020.
ABP 798 (biosimilar rituximab)
In August, a Phase 3 study in patients with CD20-positive B-cell non-Hodgkin’s lymphoma met its primary endpoint. The primary endpoint, as assessment of overall response rate by week 28, was within the prespecified margin for ABP 798 compared to Rituxan (rituximab), showing clinical equivalence.
Submission of a Biologics License Application in the U.S. for ABP 798 is expected in Q1 2020.
Tezepelumab is being developed in collaboration with AstraZeneca PLC
EVENITY is developed in collaboration with UCB globally, as well as our joint venture partner Astellas in Japan
Rituxan is a registered trademark of Genentech
Non-GAAP Financial Measures
In this news release, management has presented its operating results for the third 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 third 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.