Crystal Ball Gazing: Amgen’s Q1 Financials, What to Look For

April 26, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Unwilling to wait three days, analysts are giving some thought to what to look for when Thousand Oaks, Calif.-based Amgen releases its financial reports on Thursday, April 28.

Expectations are that the company will report $5.32 billion in revenue for the first quarter, about 6 percent higher than the same period last year, with a quarterly earnings per share (EPS) of $2.60, up 5 percent from last year’s same period.

Writing for The Motley Fool, Sean Williams suggests there are three components that will be most valuable in looking at Amgen’s first quarter. They are: operating margin, sales of Kyprolis and sales of Repatha.

Amgen has been working on its operational efficiency, which is essentially what operating margin reflects. As part of those efforts, the company announced in 2014 that it was cutting 4,000 jobs in order to cut $1.5 billion in annual expenses. Its goal isn’t necessarily to just boost net revenue, but to free up the money to spend on new drug launches and several Phase III clinical trials.

According to Williams, “When Amgen first announced these cost cuts, its operating margin was in the high 30-percentile. By 2018, Amgen believes its operating margin will surpass 50 percent and perhaps hit as high as 52 percent. Investors will be looking for continued progress in 2016.”

Last year, the company reported a 48 percent operating margin. Williams thinks anything over the 44.4 percent operating margin reported in the fourth quarter would be positive.

The company’s drug for multiple myeloma, Kyprolis, received a label expansion last summer. Because the second-line MM market is so large, investors are hoping for a big boost and steady sales growth. Another point of interest is that Johnson & Johnson recently gave its first-quarter report and its recently launched MM drug Darzalex hinted that the drug did very well. Although J&J didn’t directly break out its Darzalex sales, it appears to have been a driver of the company’s quarterly revenues. And Darzalex had a slightly better response rate in patients than Kyprolis did.

Williams writes, “It will be interesting to see if Kyprolis is losing share in third-line and up, or if the market has simply expanded to accommodate these new therapies.”

And the industry in general is keeping an eye on the company’s new cholesterol drug, PCSK9 inhibitor Repatha. Sanofi ’s Praluent, teamed with Regeneron Pharmaceuticals , brought in $10 million in first-quarter sales, which analysts feel is lower than hoped. Many analysts think the drugs have blockbuster potential, but the price tag of $14,600 for a year’s supply isn’t exactly a selling point for insurers or patients, particularly the more typical price of $50 per month for statins, which are currently the go-to treatment for high cholesterol.

Repatha is apparently priced at a discounted price of $14,100. Which also means that analysts, Williams especially, expect Amgen’s Repatha sales to be disappointing for the quarter.

“Later this year,” Williams writes, “Amgen is expected to report its long-term cardiovascular outcomes trial for Repatha. If the drug demonstrates a clinically significant improvement in risk of death reduction compared to the current (and inexpensive) standards of care, then we could see coverage of Repatha, and possibly even Praluent, pick up.”

It will also be interesting to see if Amgen gives any hints about any future mergers and acquisitions. The company recently indicated it would be interesting in acquiring something in the $10 billion range, with a particular focus on companies that have drugs close to market.

The company’s chief financial officer, David Meline, had an interview with BloombergBusiness in early March where he noted Amgen had more than $30 billion in cash and equivalents, but that the company was “more energetic about being out there,” but had turned down some deals last year that weren’t a perfect match. “The hardest thing to do when you have money in the bank is to be disciplined.”

Part of its merger strategy has involved expanding into cardiovascular and neuroscience.