Amgen Inc. turned in second-quarter adjusted earnings per share of 62 cents, topping consensus estimates and surging 27 percent higher than a year ago.

Product sales in the quarter ended June 30 propelled the Thousand Oaks, Calif.-based company's earnings per share 3 cents higher than analyst projections. In fact, total product sales grew 27 percent to $2.4 billion, up from $1.9 billion in last year's corresponding three-month period. Underlying the overall sales growth were significant increases in two products - worldwide sales of Aranesp (darbepoetin alfa) jumped 78 percent to $617 million, and Enbrel (etanercept) sales gained 45 percent to $440 million.

"In the second quarter, our business continued its strong performance with solid top-line sales growth in our key therapeutic areas of oncology, nephrology and inflammation," Kevin Sharer, Amgen's chairman and CEO, said during a conference call. "Our sales exhibited global strength, driven by the worldwide growth of Aranesp."

Overall, total revenue increased 27 percent to $2.6 billion vs. the same period last year.

Amgen's adjusted net income totaled $809 million, a 24 percent increase compared to $653 million last year. The company continues to project adjusted earnings per share to range between $2.30 and $2.40 for the full year.

On a GAAP (generally accepted accounting principles) basis, its second-quarter earnings per share of 57 cents also represented a 27 percent increase. GAAP net income was $748 million vs. $607 million a year earlier, an increase of 23 percent. GAAP guidance calls for earnings per share to range between $2.13 and $2.23 for the full year.

U.S. product sales totaled $2 billion, a 21 percent increase compared to last year's second quarter. International sales were $424 million, up from $259 million for the same quarter last year, an increase of 63 percent. Without the beneficial impact of foreign exchange in the quarter, Amgen international sales would have grown 50 percent.

Combined worldwide sales of Epogen (epoetin alfa), the company's anemia therapy for patients on dialysis, and Aranesp, its newer anemia product for anemia associated with chronic renal failure and chemotherapy, increased 30 percent to $1.2 billion. The increase primarily was driven by Aranesp demand, while Epogen sales grew more modestly at 4 percent over the same quarter last year to $633 million.

"During the second quarter, Aranesp obtained the leading market share position in Europe among nephrologists and oncologists," Sharer said, "offering greater dosing convenience to patients and physicians. We also continue to move forward on a variety of clinical studies with Aranesp, which we believe has strong growth potential."

Combined worldwide sales of Neulasta (pegfilgrastim) and Neupogen (filgrastim) grew 14 percent to $721 million, an increase driven by worldwide Neulasta sales that climbed 40 percent to $426 million, including $64 million of international sales. U.S. Neulasta sales increased 24 percent to $362 million. Worldwide Neupogen sales actually fell 11 percent to $295 million, due primarily to lower demand and to a lesser extent changes in wholesaler inventory levels. Neulasta is Amgen's once-per-cycle product for decreasing the risk of chemotherapy-related infections due to neutropenia, and Neupogen is used to decrease the incidence of many types of chemotherapy-related infections.

"Headliners Aranesp, Enbrel and Neulasta continue to provide good visibility for near-term earnings growth," Eric Schmidt, a research analyst with SG Cowen & Co. in New York, wrote in a research note. But he cautioned that "despite strong near-term prospects, our enthusiasm for Amgen shares is tempered by long-term risks that include changes to reimbursement methodologies for Epogen and Aranesp (2005), the potential for generic EPO competition in Europe (2006) and the possible entry of Roche's CERA into the U.S. market (2006/2007)."

Still, he still views Amgen "as a good stock for value-conscious investors."

That positive outlook was echoed by William Tanner, an analyst with Leerink Swann & Co. in Boston.

"We believe [Amgen] is well positioned to remain as one of the premier companies in the biotech sector," he wrote in a research note, "by virtue of attractive growth prospects for the three core franchises: Epogen/Aranesp, Neupogen/Neulasta and Enbrel."

But like Schmidt, he also warned of potential risks, including the impact of possible reform at the Centers for Medicare and Medicaid Services on the company's businesses, as well as the outcome of EPO patent litigation with Transkaryotic Therapies Inc., of Cambridge, Mass.

Going forward, Amgen highlighted the imminent start of Phase III testing of AMG 162, a monoclonal antibody for osteoporosis. It is targeted against RANKL (receptor activator of NF-kappa B ligand), which is believed to stimulate activity of osteoclasts leading to calcium resorption from bone.

Growing expenses during the quarter included the increased cost of sales, which grew 34 percent to $435 million, primarily because of increased sales volumes. Research and development expenses increased to $460 million vs. $385 million last year, primarily due to higher staff-related expenses and higher outside costs to support the pipeline. Selling, general and administrative costs totaled $587 million vs. $438 million in the prior year, primarily because of higher staff-related expenses and higher outside marketing expense.

Second-quarter capital expenditures grew to $356 million compared to $276 million a year ago, an increase principally related to the company's Puerto Rico manufacturing and Thousand Oaks site expansions, and the building of an Enbrel manufacturing plant in Rhode Island.

Share repurchases during the quarter totaled $1 billion, representing the repurchase of about 17 million shares. Amgen ended the three-month period with about 1.3 billion diluted shares outstanding. The company also closed the quarter with $4.3 billion in cash and marketable securities.

On Friday, Amgen's stock (NASDAQ:AMGN) dropped 74 cents to $55.36.

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