In what historically might be one of Amgen Inc.'s top quarters, the company posted earnings per share of 88 cents and a net income of $1.1 billion, significantly exceeding consensus estimates and driving the company's stock up 15.1 percent.
"People do get excited when a big company like this just crushes the estimates," said analyst Eric Schmidt, of New York-based SG Cowen & Co. Inc.
Amgen's stock (NASDAQ:AMGN) rose $10.65 Wednesday to close at $81.17.
The company's EPS surprised analysts, who had estimated it at 72 cents per share. Amgen's adjusted EPS and net income figures represent a 42 percent increase and a 26 percent increase, respectively, over last year's second-quarter EPS and net income of 62 cents and $809 million. Analysts said the numbers were among Amgen's strongest to date.
"They're the best I've ever seen," said Joel Sendek, an analyst with New York-based Lazard Freres & Co. LLC. "I've covered the stock for seven to eight years and this is the best I've ever seen both on the total revenue measure and on overall profitability."
Schmidt agreed: "No question - they had one of their best quarters in years. Maybe even their best quarter ever, I don't know. But it was one of those times in biotech where everything goes extremely well. There is not anything bad you could say about this quarter."
The adjusted EPS and net income figures exclude certain expenses related to Amgen's acquisitions of Immunex Corp., of Seattle, in 2001, and of Tularik Inc., of South San Francisco, in August 2004. GAAP EPS was 82 cents, and net income was $1 billion.
A variety of issues affected the second quarter, including international sales that benefited by $31 million from foreign exchange rates. The company also had a decrease in its adjusted tax rate of 5 percent, as well as a favorable resolution to its prior-year tax claims, which benefited adjusted EPS by about 4 cents.
And with adjusted operating expenses of $1.7 billion, the company had "seasonably lower spending" than expected, Sendek said, not to mention an increased demand for Aranesp, Neulasta and Enbrel. Amgen also demonstrated its ability to deal with the "reimbursement sensitivities of physicians." Investors previously were warned that broad reimbursement changes due to the Medication Modernization Act might adversely affect Amgen's drug sales, but doctors "placed a lot of orders for supportive care drugs," Sendek said.
As a result, Thousand Oaks, Calif.-based Amgen pulled in $3.1 billion in the second quarter from worldwide product sales, representing a 26 percent increase over last year's second quarter, and beating the consensus estimate of $2.9 billion.
"With biotech, a good quarter always starts with product sales and three of their four franchises significantly outperformed," Schmidt said.
The red-blood-cell booster Aranesp led the pack with sales of $837 million, a 36 percent increase over 2004's second-quarter sales of $617 million. The product not only gained market share, but also the size of the Aranesp market grew during the three months.
The anemia therapy Epogen brought in $647 million in the second quarter vs. $633 million during the same period last year. Amgen noticed a decrease in demand due to increased use of Aranesp in dialysis. The lower sales were offset by wholesaler inventory changes and spillover from prior quarters.
Sales for Neulasta and Neupogen, used to treat chemotherapy infections, were $899 million, an increase of 25 percent over the $721 million in sales from last year's second quarter. And Enbrel sales increased 45 percent during the second quarter to $639 million from $440 million last year. The inflammation drug Enbrel continues to be the dermatology market leader.
Schmidt said that the three outperforming Amgen franchises face very few competitive threats and will have "clear sailing for the foreseeable future."
"My belief is the competitive risk has been overblown on Wall Street," he said.
Amgen's stock has bounced between $54 and $70 over the last year, partly due to the perceived competition. But second-quarter results indicated that Amgen is able to handle the threats.
"They are really a company that has been able to withstand competition quite effectively," Sendek said. "The success of Aranesp vs. Procrit [Johnson & Johnson] is a striking example of that. And the maintenance of Enbrel's leadership position is a testament to that. I think people are getting more comfortable that the company will be able to succeed in this regard as more competition enters the market."
Highlights during Amgen's second quarter include the submission of a supplemental biologics license application to the FDA for Aranesp, based on Phase III data showing the drug administered every three weeks was safe and effective in treating chemotherapy-induced anemia in patients with non-myeloid malignancies. Other data from a Phase II study indicated Aranesp might cause a major response in anemic patients with myelodysplastic syndromes.
The company received FDA approval in the second quarter for an expanded indication for Enbrel. The product now can be marketed to improve physical function in patients with psoriatic arthritis.
Amgen also completed enrollment of more than 10,000 patients in pivotal Phase III trials for AMG 162 in postmenopausal osteoporosis and treatment-induced bone loss in non-metastatic breast cancer and prostate cancer. Those results should be available in the second half of 2006, Sendek said, adding that "we could see Phase II data by the end of this year."
Likewise, Amgen might release panitumumab data in colorectal cancer this year. In the second quarter, the company, along with partner Abgenix Inc., of Fremont, Calif., started a randomized, open-label Phase III trial evaluating panitumumab's effect on progression-free survival, overall survival and response rate.
At the earlier stage, Amgen is filing an investigational new drug application to begin studies this year of AMG 531 in chemotherapy-induced thrombocytopenia.
Amgen now expects to have total revenue "mid- to high teens" percentage growth this year, up from its previous estimate of "low double-digits to mid-teens." It also raised EPS guidance from the previous range of $2.80 to $2.90 up to a range of $3.10 to $3.20.
Cash and marketable securities were $4.4 billion at the end of the quarter.