Amgen Inc. shares (NASDAQ:AMGN), dented by missed fourth-quarter earnings expectations, regained lost ground Friday, buoyed by expectations for a lower 2018 tax rate and its plans to repurchase up to $10 billion of its own shares through a Dutch auction, starting as early as this week. Sparking expectations that the company will plow some of its $41.7 billion in cash into M&A this year, CEO Bob Bradway said that "we have felt for some time that there are pockets of excess capacity in the industry and we'll look to see whether we can help create some value by being part of the consolidation around those."
The Thousand Oaks, Calif.-based company reported earnings of $2.89 per share for the full year and a loss of $5.89 per share for the fourth quarter, including a $6.1 billion charge related to impacts of U.S. corporate tax reform. Its shares closed at $187.01 on Friday, up $1.45.
During a lengthy postmarket-close conference call Thursday, the company detailed a long-term outlook in which Bradway said Repatha (evolocumab), Prolia (denosumab) and Kyprolis (carfilzomib), Aimovig (erenumab), and biosimilars would drive future growth.
Bradway also spoke to tax reform, which he said "puts us on a more level playing field strategically with our international competitors who previously were advantaged by lower rates and global access to their cash." In addition, he said, the reforms provide "incentives for us to invest heavily in innovation and advanced technologies here in the U.S.," something that he noted was timely as the company prepares to deploy next-generation biomanufacturing technologies.
"We still believe that manufacturing is a source of competitive advantage at Amgen," Bradway added later, suggesting that lower capital costs and "meaningfully" lower operating costs, could, over time, have a positive impact on Amgen's cost of sales.
Amgen guided total 2018 revenues in the range of $21.8 billion to $22.8 billion, with the top of that range matching the company's full-year 2017 revenue. J.P. Morgan analyst Cory Kasimov called that "uncharacteristically wide guidance range," though wrote that it could be attributed to the timing and magnitude of legacy franchise erosion, the potential trajectory of recent and upcoming launches, and the extent to which Amgen chooses to exercise its upsized share repurchase authorization – a program that has now grown to total $14.4 billion from an earlier $4.4 billion.
Kasimov and other analysts took a particular interest in what Amgen's chief financial officer, David Meline, identified as potential challenges for the company, including "possible generic competition to Sensipar, continuing competitive dynamics for Enbrel, and expected new competition against Neulasta and Aranesp."
The composition-of-matter patent on Sensipar (cinacalcet) expires in March, but Amgen has pursued litigation over pediatric exclusivity with the FDA, and separately, over the formulation patent with potential generic competitors, it said.
Enbrel (etanercept) sales decreased 13 percent for the fourth quarter and 9 percent for the full year, driven by lower unit demand and net selling price. The company expects those trends will continue into 2018, even as it pursues life-cycle management strategies, such as Enbrel Mini with Autotouch, recently launched alongside a new low-pain formulation for rheumatoid arthritis patients.
Neulasta (pegfilgrastim) sales were flat year over year, the company reported, with "low-single-digit decline in the use of myelosuppressive chemotherapy regimens due to growth in new and less toxic therapies," according to Anthony Hooper, Amgen's head of global commercial operations. Aranesp (darbepoetin alfa) is also facing challenges, Hooper said, as competitors take market share and the company prepares for the arrival of short-acting biosimilar alternatives to the therapy.
For the fourth quarter, Amgen's total revenues decreased 3 percent to $5.8 billion vs. the fourth quarter 2016 revenue of $5.97 billion. For full-year 2017, total revenues decreased 1 percent to $22.85 billion from $22.99 billion in 2016.
Total product sales decreased 2 percent for the fourth quarter of 2017 to $5.57 billion vs. $5.66 billion in the fourth quarter of 2016. Product sales were flat for the full year 2017.
Epogen (epoetin alfa) sales decreased by 15 percent for the fourth quarter and the full year, driven primarily by lower net selling price. Neupogen (filgrastim) sales fell, too, down 27 percent for the fourth quarter and 28 percent for the full year driven by lower unit demand.
The company had better news to share about Repatha, sales of which increased 69 percent for the fourth quarter and 126 percent for the full year, driven by higher unit demand. The increased was attributed in part to the recent inclusion of cardiovascular outcomes data in Repatha prescribing information.
Blincyto (blinatumomab) sales also offered a bright spot, increasing 59 percent for the fourth quarter and 52 percent for the full year, driven by higher unit demand and, to a lesser extent, net selling price, the company said.
Prolia sales increased 24 percent for the fourth quarter and 20 percent for the full year driven by higher unit demand. And Kyprolis sales increased 24 percent for the fourth quarter and 21 percent for the full year driven by higher unit demand.
Free cash flow for the 2017 grew 9 percent to $10.5 billion, driven by higher operating income and favorable changes in working capital, Amgen said. At year-end, cash and investments totaled $41.7 billion.