Amgen Beats Street’s Earnings Estimates, Ready for Biosimilars, Says Citi

Published: Jan 27, 2015

Amgen Beats Street’s Earnings Estimates, Ready for Biosimilars, Says Citi
January 27, 2015
By Riley McDermid, Breaking News Sr. Editor

Biotech darling Amgen beat Wall Street consensus for its fourth quarter earnings late Tuesday, news that had analysts optimistic about the company’s outlook heading into 2015 and convinced it is taking the threat of biosimilars seriously.

Amgen’s total revenue for the quarter was $5.3 billion, a slight uptick from the consensus estimate of $5.2 billion, while earnings per share were $2.16 versus a Street consensus of $2.04. Citigroup’s biotech team leader Yaron Werber was quick to point out that Citi had projected EPS of $2.15 and said investors need to remember that this particular gain was due to a one-time tax credit that boosted EPS by $0.14.

The key to these numbers was Amgen’s commitment to solid inventory levels, Werber said Tuesday.

“Fourth quarter EPS beat was driven by top-line due to favorable inventory changes and lower tax rate despite higher operating expenses. Wholesaler inventory levels returned to normal but increased revs sequentially by 7 percent,” he wrote in a note to investors.

Werber said operating expenses were slightly higher mostly due to selling, general and administrative expenses, but Amgen did confirm its year 2015 guidance as expected.

“In 2015, revs are looking up slightly y/y driven by global expansion and new launches but offset by competition to Neupogen/Epo,” wrote Werber. “Repatha’s launch will be slightly better than expected in our view with less price competition than feared. But the launch will be gradual and unlikely to dramatically drive revs upside near-term.”

Amgen also appears to be taking the threat of biosimilars seriously, wrote Werber, which will be a relief to investors who are closely watching the patent expiration deadline on many drugs soon to be targeted by cheaper knock-offs. Amgen seems ready to weather those difficulties, said Werber.

“In 2015 Amgen will release Phase III data for their biosimilar AMG501 adalimumab (Humira) and AMG215 bevacizumab (Avastin),” said Werber. “Biosimilars can offer a long term tailwinds but will be headwinds as Epo, Neupogen and Neulasta estimates are biased downwards and these are high margin drugs. So Amgen will cut operating expenses to offset the erosion.”

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