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Amgen Beats Q2 Estimates, Stays Quiet on M&A Front

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By Jennifer Boggs
Managing Editor

Amgen Inc. soundly beat second quarter revenue and earnings estimates, but it was the big biotech's acquisition strategy that was the elephant in the room during the Tuesday evening conference call, as company executives were able to head off attempts to tease out details regarding rumors of its recent – and rejected – $10 billion bid for Onyx Pharmaceuticals Inc.

"I can imagine there might be questions about our M&A strategy," Chairman and CEO Robert A. Bradway acknowledged in his opening remarks. He was cagey about disclosing specific plans, however, stating only that Amgen, which ended the second quarter with about $22 billion in cash, would seek assets "that have attractive growth potential, an attractive return on capital for shareholders" and would "line up well" with current capabilities and infrastructure.

Amgen has continued to remain mum on reports that it offered $120 per share late last month for South San Francisco-based Onyx. The unsolicited offer was rejected, with Onyx claiming it undervalued the firm, despite the bid representing a 38 percent premium to the previous day's closing price. But given the currently high valuations for biotechs and the limited number of firms with approved products and revenue streams, most analysts have agreed that Amgen – or another prospective buyer – would have to pay more for the midcap cancer drug firm. Onyx, in the meantime, has said it would seek other potential suitors. (See BioWorld Today, July 2, 2013.)

Any company that acquires Onyx would gain a revenue stream for well-entrenched cancer drug Nexavar (sorafenib). The multikinase inhibitor is partnered with Leverkusen, Germany-based Bayer AG and recorded sales of $1.1 billion in 2012, with about $300 million of that going to Onyx.

The firms also are looking to expand Nexavar's use, having recently submitted applications in both the U.S. and Europe for locally advanced or metastatic radioactive iodine-refractory differentiated thyroid cancer.

Onyx also has proteasome inhibitor Kyprolis (carfilzomib), acquired in its 2009 buyout of Proteolix Inc., which gained accelerated approval last year for third-line multiple myeloma. And another Bayer partnership provides a 20 percent royalty for oral multikinase inhibitor Stivarga (regorafenib), which got an FDA nod last fall in metastatic colorectal cancer. (See BioWorld Today, July 23, 2012, and Sept. 28, 2012.)

Bradway said Amgen would be disciplined in its M&A activities and would focus on transactions "we can finance with cash."

Meanwhile, its second quarter figures hit or exceeded projections. In its earnings report, released after market close, Thousand Oaks, Calif.-based Amgen reported total revenues of $4.7 billion for the second quarter, besting consensus estimates of $4.49 billion. GAAP net income totaled $1.3 billion, or $1.65 per share, while adjusted earnings per share (EPS) came in at $1.89. Analysts had predicted EPS of $1.74.

The company also raised its full-year guidance, projecting 2013 revenues in the range of $17.8 billion to $18.2 billion. EPS for the year was raised to $7.30 to $7.45 per share.

Amgen reported total product sales jumping 9 percent over the same period last year, driven by steady growth from most of its established franchises. Sales of Enbrel (etanercept), which is approved for plaque psoriasis, psoriatic arthritis and rheumatoid arthritis, totaled about $1.15 billion, a 9 percent jump over the second quarter of 2012, while neutropenia drug Neupogen (filgrastim) and its longer-acting version Neulasta (pegfilgrastim) pulled in combined sales of $1.4 billion, a 7 percent increase.

Anemia drugs Epogen (epoetin alfa) and Aransep (darbepoetin alfa) both showed slight declines in the second quarter, posting sales of $502 million and $524 million, respectively, though Amgen noted that quarter-over-quarter sales of Epogen increased 15 percent, due in part to the a Medicaid rebate adjustment and partly to the recall of competing erythropoiesis-stimulating agent Omontys (peginesatide) from Affymax Inc. and Takeda Pharmaceutical Co. Ltd. in February following postmarketing reports of serious hypersensitivity reactions. (See BioWorld Today, Feb. 26, 2013.)

Sales of RANK ligand inhibitor Xgeva/Prolia (denosumab) grew 46 percent, for second quarter sales of $437 million, the larger increase coming from the drug's sales as Prolia for osteoporosis indications.

The biotech's R&D expenses jumped 17 percent over the same period last year, which Amgen attributed primarily to its late-stage programs such as hypercholesterolemia candidate AMG 145. That drug, an antibody directed to the hot PCSK9 target, is expected to yield top-line pivotal data in the first quarter of 2014.

If all goes well, AMG 145 will become part of Amgen's growing cardiovascular portfolio. Earlier this year, the firm inked a deal with Les Laboratoires Servier SA, gaining commercial rights to Servier's Procoralan (ivabradine) for chronic heart failure and stable angina in patients with elevated heart rates. The deal also gave Amgen an option to the French firm's investigational S38844, which is in Phase II studies in heart failure.

It also has rights to omecamtiv mecarbil for heart failure through a 2006 deal with South San Francisco-based Cytokinetics Inc.

Elsewhere in the pipeline, Amgen has oncolytic immunotherapy talimogene laherparepvec – aka T-VEC – which met its primary endpoint in a Phase III study in melanoma in March. (See BioWorld Today, March 21, 2013.)

As previously disclosed, Amgen's board declared a 47-cent-per-share dividend for the third quarter of this year, which will be paid Sept. 6 to all stockholders of record as of Aug. 16, 2013.

Shares of Amgen (NASDAQ:AMGN) closed Tuesday at $111.20, up $1.83.

In other earnings news:

• Vertex Pharmaceuticals Inc., of Cambridge, Mass., reported second quarter revenues of $311 million, including net product revenues of $99 million from Kalydeco (ivacaftor) and $156 million from Incivek (telaprevir). The company's GAAP net loss for the quarter was $57.2 million, or 26 cents per share, including charges of $51 million, composed primarily of stock-based compensation expense. Total revenues for the quarter were $310.8 million, compared with $418.3 million for the second quarter of 2012. Net product revenues from Kalydeco were $99 million for the second quarter, compared to $45.5 million during the same period in 2012. Net product revenues from Incivek were $155.8 million for the quarter, compared to $327.7 million for the second quarter of 2012. The company reported $1.43 billion in cash, equivalents and marketable securities as of June 30. On Tuesday, the company's shares (NASDAQ:VRTX) gained $2.25, closing at $81.91.