A month has gone by since the last earnings report for Amgen (AMGN). Shares have lost about 4.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Amgen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Q4 Earnings Top, Product Sales Decline
Amgen’s fourth-quarter results were mixed as it beat estimates for earnings while missing the same for sales.
Amgen reported fourth-quarter 2021 earnings of $4.36 per share, which beat the Zacks Consensus Estimate of $4.14. Earnings rose 26% year over year driven by higher revenues, lower SG&A costs and lower share count
Total revenues of $6.85 billion missed the Zacks Consensus Estimate of $6.91 billion. Total revenues rose 3% year over year, driven by higher Other Revenue from the Lilly collaboration, which offset the decline in product sales.
Volume-driven growth of Repatha, Prolia, and Evenity and some biosimilar drugs and higher revenues from Eli Lilly drove the top line in the quarter. However, pricing pressure and increased competition continue to hurt sales of some drugs.
The recovery seen in patient visits and diagnoses rates in the previous quarters, continued in the fourth. However, the Omicron-related surge in infection rates toward the end of the year led to some delay in healthcare procedures and variability in demand patterns, which may hurt sales in 2022.
Total product revenues declined 1% from the year-ago quarter to $6.27 billion (U.S.: $4.45 billion; ex-U.S.: $1.82 billion). Higher volumes were offset by lower selling prices of several drugs and lower inventory levels. Volumes rose 7% in the quarter.
Other revenues of $575 million rose 92% year over year, aided by shipments to Eli Lilly. Amgen had signed a collaboration with Eli Lilly in 2020 for the manufacture of COVID-19 antibodies that the latter is currently developing.
Performance of Key Drugs
Prolia revenues came in at $873 million, up 17% from the year-ago quarter, driven by double-digit volume growth as new and repeat patient volumes continued to recover from the impact of the pandemic. However, the surge in Omicron-related infection rates toward the end of the fourth quarter resulted in volatility in recovery rates, which Amgen said may hurt sales in 2022.
Evenity recorded sales of $143 million in the quarter, up 59% year over year, driven by strong volume growth.
Xgeva delivered revenues of $545 million, up 9% from the year-ago quarter driven by volume growth, and favorable changes to estimated sales deductions, which offset the impact of lower prices.
Kyprolis recorded sales of $284 million, up 4% year over year.
Repatha generated revenues of $273 million, up 8% year over year, as higher volume was partially offset by lower prices due to an increase in Medicare Part D patients receiving Repatha and entering the coverage gap (donut hole).
Vectibix revenues came in at $243 million, up 10% year over year. Nplate sales rose 24% to $282 million. Blincyto sales increased 28% from the year-ago period to $132 million.
Aimovig recorded sales of $90 million in the quarter, down 13% year over year due to lower net selling price.
Sales of Otezla were $630 million in the quarter, up 2% due to volume growth, which offset the impact of lower selling prices and lower inventory. In December, the FDA approved Otezla for the treatment of adults with plaque psoriasis who are candidates for phototherapy or systemic therapy. The expanded approval increases the eligible patient population for Otezla, which can benefit sales in 2022.
Amgen’s newly approved drug, Lumakras (sotorasib) recorded sales of $45 million in the quarter compared with $36 million in the previous quarter.
More than 1,000 oncologists have prescribed Lumakras in both academic and community settings. KRAS testing of metastatic NSCLC patients stands at approximately 75%. In ex-U.S. markets, Lumykras is currently approved in 35 countries.
In biosimilars, sales of Kanjinti were $139 million, down 12% year over year due to lower volumes and pricing as a result of increased competition, which was partially offset by favorable changes to estimated sales deductions.
Sales of Mvasi were $304 million in the quarter, up 9% year over year driven by volume growth, which was partially offset by declines in net selling price due to increased competition. Amjevita (biosimilar of Humira) sales were $115 million in the quarter, up 12% year over year driven by volume growth, which was partially offset by lower net selling price.
In 2022, volume growth of biosimilars is expected to be offset by lower pricing due to increased competition and average sales price erosion. However, biosimilar revenues are expected to return to growth with the launch of Amjevita (Humira biosimilar) in 2023.
However, total sales of mature drugs like Enbrel, Parsabiv, Neupogen, Aranesp, Epogen and Neulasta declined 27% in the quarter due to an array of branded and generic competitors. Enbrel revenues of $1.08 billion declined 13% year over year due to lower volumes, inventory and price.
Sales of products like Otezla and Enbrel are expected to be lower in the first quarter relative to subsequent quarters due to the historical pattern due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S. patients work through deductibles.
Operating Margins Rise
The adjusted operating margin rose 470 basis points (bps) to 47.8%. Adjusted operating expenses declined 1% to $3.85 billion. SG&A spend declined 19% to $1.43 billion. R&D expenses rose 11% year over year to $1.32 billion due to higher spend related to Amgen’s recent research collaborations with Generate Biomedicines and Arrakis Therapeutics.
Adjusted tax rate was 11.6% for the quarter, a 3.0-point decrease from the year-ago quarter.
Amgen repurchased 6.9 million shares worth $1.5 billion in the quarter.
2021 Results
Full-year 2021 sales rose 2% to $26.0 billion, slightly missing the Zacks Consensus Estimate of $26.05 billion. Sales were within the guided range of $25.8 billion-$26.2 billion. Sales rose 2% year over year.
Adjusted earnings for 2021 were $17.10 per share, which beat the Zacks Consensus Estimate of $16.85 and came in at the higher end of the guided range of $16.50 to $17.10. Earnings rose 6% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -6.04% due to these changes.
VGM Scores
At this time, Amgen has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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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