It has been about a month since the last earnings report for Amgen (AMGN). Shares have added about 0.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Amgen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Amgen Beats on Q2 Earnings & Sales
Amgen reported second-quarter 2020 earnings of $4.25 per share, which beat the Zacks Consensus Estimate of $3.81. Earnings rose 7% year over year driven by higher revenues and lower share count.
Total revenues of $6.21 billion beat the Zacks Consensus Estimate of $6.18 billion. Total revenues rose 6% year over year.
Due to COVID-19 pandemic, interruptions to physician-patient interactions led to delays in diagnosis and treatment of several of Amgen’s drugs. However, management said that the negative impact from COVID-19 was more pronounced early in the second quarter and improved in the second half of the quarter.
Quarter in Detail
Total product revenues rose 6% from the year-ago quarter to $5.91 billion (U.S.: $4.43 billion; ex-U.S.: $1.48 billion). Higher sales of Otezla, Repatha and biosimilar products were offset by lower sales of several other drugs like Prolia, Xgeva, Kyprolis and others due to COVID-19 and the erosion of mature brands from biosimilar/new competition. Business disruption due to decline in visits of patients to doctors’ clinics amid the coronavirus pandemic hurt sales of some of its products.
Product sales growth was mostly driven by higher volumes (up 13%) as prices were lower for several drugs.
Other revenues of $298 million were almost flat year over year.
Performance of Key Drugs
Prolia revenues came in at $659 million, down 6% from the year-ago quarter. Volumes of the drug declined due to fewer office visits by osteoporosis patients who are generally older and more vulnerable to COVID-19 and require in-office administration. Management is working to implement alternative sites of care and mobile nurse administration to address some of the issues with patient access.
Xgeva delivered revenues of $435 million, down 13% from the year-ago quarter due to disruptions in physician-patient interactions amid COVID-19 pandemic. Moreover, in response to the pandemic, the National Comprehensive Cancer Network (NCCN) revised its treatment guidelines to prioritize primary cancer treatments over bone targeting agents like Xgeva. This also hurt sales of Xgeva in the second quarter.
Kyprolis recorded sales of $253 million, down 5% year over year, hurt by lower volumes due to reduced multiple myeloma patient visits to doctors.
Repatha generated revenues of $200 million, up 32% year over year, as higher volume was partially offset by lower prices due to Amgen’s efforts to improve access and affordability for the product. However, Repatha’s new prescription growth in the United States were negatively impacted by COVID-19 in April but improved later in the quarter. However, CVS removed Repatha from its national formulary at the start of July, which may hurt Repatha’s prescription growth in the third quarter. Net selling prices are expected to remain stable
Vectibix revenues came in at $195 million, down 1% year over year. Nplate sales declined 4% to $193 million due to slower volume growth as fewer patients visited doctors and loss of new patient starts to oral alternatives.
Blincyto sales increased 19% from the year-ago period to $93 million driven by higher demand.
Parsabiv recorded sales of $186 million, up 11% driven by higher demand, which offset the impact of lower selling prices.
Aimovig recorded sales of $98 million in the quarter, higher than $71 million in the previous quarter as higher volumes offset the impact of lower price as Amgen expanded patient access.
Aimovig volumes rose 45% in the quarter. It commanded a 41% market share among CGRP antibodies at the end of the second quarter. New-to-brand prescription trends for the CGRP market were hurt by COVID-19 in the second quarter. Net selling prices are expected to remain stable through the rest of the year.
Evenity recorded sales of $101 million in the quarter compared with $100 million in the previous quarter. In the United States, sales were $40 million while international sales were $61 million. Sales were hurt by slower new patient starts in the United States. Amgen expects a slowdown in reported sales in the third quarter as the first half of 2020 benefited from larger shipments to its Japan-based partner, Astellas.
Sales of Otezla were $561 million in the quarter, up 14% year over year driven by volume growth.
Biosimilar generated revenues of $357 million in the quarter. Among biosimilars, Amjevita sales were $62 million in the quarter, down 28% sequentially due to lower selling prices and reversal of stockpiling benefits of the first quarter. Sales of Kanjinti and Mvasi were $123 million and $172 million in the quarter, compared with $119 million and $115 million, respectively, in the previous quarter. The company expects increasing competitive pressure on Kanjinti and Mvasi in the future quarters because of the launch of competing biosimilar products.
However, Amgen’s mature drugs like Enbrel, Aranesp, Epogen, Neupogen and Neulasta have been facing an array of branded and generic competitors.
Aranesp revenues declined 11% from the prior-year quarter to $387 million due to lower net selling price and demand trends due to increased competitive pressure.
Revenues of the other ESA, Epogen, declined 28% to $161 million due to lower demand and selling prices.
Neulasta revenues declined 28% from the year-ago period to $593 million due to the impact of biosimilar competition on demand and price. However, share of Neulasta OnPro in the long-acting G-CSF segment increased to 58% in the quarter as it provided a convenient solution to help patients avoid additional visits.
Neupogen recorded 35% decline in sales to $49 million in the quarter. Enbrel delivered revenues of $1.25 billion, down 9% year over year due to lower demand and market share as well as slower growth pace in the rheumatoid arthritis market.
Sensipar/Mimpara revenues declined 34% to $81 million due to generic competition.
Other product sales declined 24% to $60 million.
Operating Margins Rise
Adjusted operating margin rose 170 basis points (bps) to 55.0%. Adjusted operating expenses rose 2% year over year in the quarter to $2.96 billion
SG&A spend rose 1% to $1.27 billion as Otezla-related commercial expenses offset other lower expenses due to COVID-19. R&D expenses rose 3% year over year to $936 million as higher spending on Amgen’s oncology pipeline and costs related to Otezla were partially offset by cost recoveries from BeiGene.
Adjusted tax rate was 13.7% for the quarter, a 1.6 points decrease from the year-ago quarter.
Amgen repurchased 2.6 million shares worth $591 million in the quarter and has $4.9 billion remaining under its stock repurchase authorization.
2020 Outlook
Amgen re-affirmed its previously issued sales guidance for 2020 while raising its earnings range. Amgen expects fluctuations in quarterly revenues and earnings as long as the pandemic continues due to uncertainty around the timing of the recovery.
Amgen continues to expect revenues in the range of $25.0 billion-$25.6 billion.
Adjusted earnings per share guidance was raised from a range of $14.85-$15.60 to $15.10 to $15.75 per share.
Adjusted operating costs are expected to grow in a high single-digit percentage range year over year in 2020. In fact, operating expenses are expected to meaningfully increase in the second half of the year due to investments in pipeline as clinical trial and lab activity accelerate and for launch preparation of its late-stage pipeline products. Adjusted tax rate is expected in the range of 13.5% to 14.5%.
Amgen plans to spend approximately $600 million for capital expenditures in 2020. The company guided that it will buy back shares at the lower end of the previous guidance of $3 billion to $5 billion through the year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Amgen has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Amgen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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