Washington Editor

Amgen Inc. attributed recent label changes to a slowdown in sales of its flagship product, Aranesp (darbepoetin alfa), but the company nonetheless managed to meet consensus earnings-per-share estimates of $1.08 last quarter.

"We've had an event-filled and busy couple of months here," Amgen Chairman and CEO Kevin Sharer said during a conference call with investors, noting that the three-month results represent "a really strong quarter" for the Thousand Oaks, Calif.-based company.

Still, he acknowledged a bit of weakness in sales of Aranesp, which totaled $1.02 billion on a worldwide basis but were $74 million lower than Wall Street expectations. That's nevertheless a 14 percent increase over last year's first quarter total of $893 million, growth largely driven by demand, but a slight dip on a quarter-over-quarter comparison to the nearly $1.11 billion recorded in the final three months of last year. U.S. sales reached $654 million compared to $596 million in last year's first quarter, but Sharer conceded that this slowing 10 percent growth rate was driven by initial customer reaction to new FDA warnings on the product's label.

Recent studies have shown that the red blood cell booster and earlier versions of the erythropoiesis-stimulating agent, Epogen (epoetin alfa) and Procrit (epoetin alfa), can increase the risk of death and confer higher chances of cardiovascular events and tumor growth when they are administered at doses higher than their labels suggest. These data prompted the FDA to request black box warnings on the products.

There's also competition on the horizon, F. Hoffmann La-Roche Ltd.'s Mircera, which has worried some investors about Amgen's franchise, as have concerns about government inquiries into pricing.

Questions around the products' clinical use should be addressed in two weeks at a meeting of the FDA's Oncologic Drugs Advisory Committee, about which Sharer said he's "hopeful and optimistic." He stressed that the products "are certainly safe" when used within their label recommendations.

That conclusion is backed by recent Phase III data showing that Aranesp did not raise safety concerns in previously untreated patients with extensive-stage, small-cell lung cancer receiving platinum-containing chemotherapy. (See BioWorld Today, April 20, 2007.)

Amgen's EPS, which were adjusted to exclude stock option costs and certain other expenses such as acquisitions, represented a 19 percent increase compared to 91 cents in last year's first quarter, and correspondingly, adjusted net income increased 15 percent to $1.27 billion over last year. Total revenue also increased 15 percent compared to last year, reaching $3.69 billion, driven by 14 percent growth in total product sales to $3.57 billion.

Sharer pointed to the company's numbers as "a performance we really feel good about."

Aranesp was its top earner, despite its slowing growth rate, while sales of its earlier generation Epogen ticked up 3 percent to $625 million. Combined worldwide sales of Neulasta (pegfilgrastim) and Neupogen (filgrastim) grew 14 percent to $1.02 billion, driven by increased demand for Neulasta. Sales of Enbrel (etanercept) increased 11 percent to $730 million, worldwide sales of Sensipar (cinacalcet HCl) jumped 72 percent to $105 million and Vectibix (panitumumab) sales grew to $51 million, up from $39 million in last year's fourth quarter, its first three months on the market.

"All of our key products had a good performance," Sharer said, speaking to Amgen's "underlying strength in the business."

In terms of costs, research and development expenses increased 29 percent to $803 million; selling, general and administrative expenses grew 15 percent to $748 million; the cost of sales inched up 1 percent to $559 million and capital expenditures grew to about $325 million, up $100 million. In addition, Amgen spent $537 million to repurchase 8.8 million of its common shares, part of an overall stock repurchase program that has $6 billion remaining.

The company's non-adjusted earnings per share, calculated in accordance with U.S. generally accepted accounting principles (GAAP), increased 15 percent to 94 cents compared to 82 cents a year earlier. Net income increased 11 percent to $1.11 billion.

Looking ahead, Amgen's revenue guidance is up for review at this time, and Sharer is projecting adjusted EPS to be at the low end of its earnings guidance range of $4.30 to $4.50. The consensus is calling for $4.31. Sharer said Amgen would take action to reduce operating expenses to offset revenue impact, and added that the company would update revenue guidance as the year progresses, in particular with regard to Aranesp and Epogen sales forecasts upon reporting second-quarter numbers.

"We're doing the prudent things here to deliver value to shareholders," he said, "and also to invest in the future in a period of some uncertainty."

In terms of coming pipeline progress, the company said it remains on track to file for U.S. and European approval this year for AMG 531 in pre-splenectomy immune thrombocytopenic purpura patients. Newly available Phase III data revealed a favorable efficacy and safety profile, with all endpoints successfully met. In addition, fresh Phase III findings showed that a 332-patient study of denosumab in postmenopausal osteoporosis met all primary and secondary endpoints, with further data in this indication and in breast cancer patients undergoing hormone ablation therapy expected later this year. Lastly, Amgen expects results from several of its earlier and mid-stage cancer programs to be presented at the American Society of Clinical Oncology meeting in June.

The company closed the quarter with 1.17 billion shares outstanding, $4.84 billion in cash reserves and $7.31 billion in debt. On Tuesday, its stock (NASDAQ:AMGN) lost 97 cents to close at $61.22.