Reporting a 19 percent increase in product sales over last year, Amgen Inc. topped consensus estimates for the three months ending Sept. 30, though its revenue fell short of expectations.

The company reported earnings per share of 85 cents for the third quarter, a 33 percent increase vs. 64 cents a year ago, and 2 cents higher than the 83 cents projected by industry analysts. Net income totaled $1.1 billion, an increase of 27 percent over the $839 million reported for the third quarter of 2004, while total product revenue came in at $3 billion, over last year's $2.6 billion.

However, coming after its unexpected second-quarter surge in which the company beat estimates by a whopping 16 cents and posted sales of $3.1 billion, the third-quarter revenue failed to rise to analysts' estimate of about $3.3 billion, causing Amgen's shares to lose $3.99 Thursday. Its stock (NASDAQ:AMGN) closed at $74.10.

"Even though the bottom-line EPS was very strong, the company did have a modest, but sequential downtick in revenues," said Eric Schmidt, an analyst with New York-based SG Cowen & Co, which had estimated third-quarter sales of $3.11 billion. "We haven't seen that happen at Amgen in about five years." Given that the company posted such strong second-quarter results, "most of us were somewhat optimistic we'd see a modest uptick over Q2," he added.

During the company's conference call, executives attributed the slight decline to the loss of two shipping days during Fourth of July holiday period and claimed that year-to-year data more accurately measured the company's growth.

That explanation is "plausible when you do the math," said analyst Christopher Raymond, of Chicago-based Robert W. Baird & Co. But, he said, "the real focus in Aranesp. That drug had a huge second quarter, and even though it's up sequentially [in the third quarter], it missed expectations."

The anemia drug Aranesp (darbepoetin alfa) posted worldwide sales of $840 million for the third quarter, a 38 percent increase over last year's sales of $608 million, though slightly under market expectations of $850 million. The biggest increase in Aranesp came from U.S. sales, which rose from $374 million for the third quarter of 2004 to $542 million. International Aranesp sales were $298 million, compared to $234 million for the same quarter last year.

Amgen also is working to expand the use of Aranesp, and plans to conduct a Phase III program in 3,400 chronic heart failure patients with anemia. That program is expected to take about three years.

But despite its third-quarter revenues, the company remains on track. "There may be a little top-line disappointment," Raymond told BioWorld Today, "but it's impressive that they were still able to beat the numbers by 2 cents."

Schmidt said Amgen remains SG Cowen's top large-cap pick, with its cash flow, its ability to exceed expectations and its history of solid growth. "I don't see that changing," he said.

According to GAAP-adjusted figures, the company's net income for the quarter was $967 million, or 77 cents per share, up from $236 million, or 18 cents during the same three-month period in 2004. Last year, Amgen's numbers were affected by its acquisition of South San Francisco-based Tularik Inc. for $554 million. (See BioWorld Today, Oct. 22, 2004.)

Amgen said it expects to hit its projected guidance for 2005 of mid-to-high teens revenue growth, and a range of $3.10 to $3.20 for adjusted earnings per share. The Thousand Oaks, Calif.-based company ended the quarter with cash and marketable securities of $5.6 billion.

Chairman and CEO Kevin Sharer called the third-quarter earnings "strong," driven by sales of Aranesp, along with Neulasta and Enbrel. "It gives us real momentum as we look to 2006," Sharer added.

Sales of Epogen (epoetin alfa), which also is approved to treat anemia, decreased by 12 percent during the third quarter, due to the increased use of Aranesp in the hospital setting. Epogen's sales totaled $599 million, compared to $681 million last year.

Combined sales of Neulasta (pegfilgrastim) and Neupogen (filgrastim) were $882 million for the quarter, an increase of 17 percent from the $752 million posted for the third quarter of 2004. Growth there was attributed to an increased demand for the drugs, as well as the recent updated prescribing information for administration of Neulasta in the first cycle of chemotherapy for patients receiving myelosuppressive chemotherapy associated with at least a 17 percent risk of febrile neutropenia. Neulasta and Neupogen work by selectively stimulating the production of neutrophils, a type of white blood cell that helps fight infections.

Enbrel (etanercept), Amgen's TNF-alpha inhibitor to treat rheumatoid arthritis and psoriasis, increased in sales by 35 percent to $668 million over last year's $496 million.

The company reported that the drug is holding about 44 percent of the market in rheumatoid arthritis and about 85 percent in dermatology.

While the company's revenue increased, so did its operating expenses, including research and development costs, which totaled $559 million for the quarter, above the $495 million spent during the third quarter of 2004. The jump was driven by the addition of personnel as the company prepares to begin Phase III trials of its bone-loss drug, denosumab. Amgen previously reported positive Phase II results of denosumab in suppressing pathologic bone turnover in patients with metastatic breast cancer. The Phase III program is expected to be completed in 2008.

Research and development spending is expected to increase during the fourth quarter and in early 2006, said Richard Nanula, chief financial officer, "as we expect to initiate a number of new studies" to support ongoing pipeline development. The company expects to begin two Phase II studies by the end of the year of AMG 531 in chemotherapy-induced thrombocytopenia. Results of ongoing Phase III trials of the drug in immune thrombocytopenic purpura are anticipated in the second half of 2006.

And AMG 108, a monoclonal antibody aimed at blocking interleukin-1 that missed its primary endpoint in a Phase II study in osteoarthritis, will continue to be developed as a treatment for other inflammatory diseases, such as rheumatoid arthritis.

By the end of 2005, Amgen and partner Fremont, Calif.-based Abgenix Inc. plan to file a biologics license application for panitumumab, which targets the epidermal growth factor receptor to treat colorectal cancer. Interim results from two ongoing trials show that the product provokes the shrinking of tumors when given as a single agent once every two weeks. Panitumumab was granted fast-track status by the FDA.

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