Amgen Registers 9% Q1 Revenue Growth, Cautions over Health Reform Impact

U.S. biotech major Amgen has registered positive results for the first quarter ended 31 March 2010, with net revenues up by 8.58% year-on-year (y/y). The highlight of this quarter's results was the continued performance of key drugs such as Neulasta (pegfilgrastim), Sensipar (cinacalcet), and Enbrel (etanercept), reflecting higher demand. As a result, product sales ended the quarter higher by 9%, to US$3.52 billion. The firm said that changes in foreign exchange positively affected first-quarter sales by US$39 million. International product sales increased by 16% to US$851 million, registering strong growth in both developed and developing markets outside the United States.

In terms of expenditure, research and development (R&D) costs were up 2% y/y, primarily driven by higher staffing-related costs and lower expense recoveries associated with ongoing collaborations, the firm said. However, clinical trial costs were lower. Selling, general, and administrative (SGA) expenses were up 10.7% y/y due to Prolia (denosumab)-related approval procedures. Higher expenses were also booked on account of the Pfizer profit-share due to higher Enbrel sales. Litigation expenses and staff costs rounded off the higher SGA costs. Expenses associated with the Pfizer profit share stood at US$269 million for the first quarter of 2010, up from US$248 million in the corresponding period last year.

Despite the higher cost structure, operating income ended at 11% y/y growth, with operating margins 0.87 percentage points higher. Net income stood at US$1.16 billion, representing growth of 14.51% y/y. The firm said that the U.S. health reform implementation has added to the cost structure, triggering an increase of US$33 million for the first quarter.

Individual product sales demonstrated the strength in Amgen's growth. Anaemia drugs Aranesp (darbepoetin alpha) and Epogen (epoetin alpha) registered contrasting growth figures, with the former continuing to face pressure. U.S. sales of Aranesp decreased by 8.21% y/y due to a decline in demand, which was partially offset by favourable wholesaler inventory changes, the firm said. International sales of US$359 million were showed improvement mainly on account of a positive foreign-exchange impact. Epogen, on the other hand registered a 10% rise in U.S. sales purely on demand due to increased dose utilisation and to a lesser extent due to an increase in patient population growth. Enbrel (etanercept) was up 6% y/y in the United States, driven by a rise in demand due to a low single-digit percentage point increase in average net sales price, partially offset by a slight decline in units sold, reflecting a share decline as a result of increased competitive activity in dermatology, Amgen said. Sensipar (cinacalcet) was up on higher international sales and favourable changes in U.S. wholesaler inventories.

Outlook and Implications

The world's largest biotech firm, Amgen continued to demonstrate a healthy rise in both topline and bottomline growth, ensuring a good start to the financial year 2010. Contributing to its performance were its top products, wherein higher sales gained traction on account of demand. International sales were also higher in comparison with U.S. sales, a reflection of the rising significance of the European as well as emerging markets for Amgen in the near future. In terms of product sales, Aranesp has disappointed, being weighed down by the declining trend in demand triggered by the boxed warning of serious cardiovascular events, chronic renal failure, and cancer demanded by the U.S. FDA for the erythropoiesis-stimulating agents drug class. However, other drugs in the firm's portfolio have stepped up, with Enbrel continuing to lead.

The year ahead, however, is expected to be difficult for the biotech major, and the firm has revised its guidance figures to include mention that revenues will be at the lower end of the US$15.1–15.5 billion range, as will adjusted earnings per share. The implementation of U.S. healthcare reform will continue to affect the firm's finances with anticipated costs of US$200–250 million during the year. Positives for the coming year include Amgen's continued pursuit of approval for Prolia (denosumab) in the EU. In March 2010, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) re-issued a positive opinion for the marketing authorisation of Prolia for the treatment of osteoporosis in postmenopausal women at increased risk of fractures, and for the treatment of bone loss associated with hormone ablation in men with prostate cancer at increased risk of fracture, raising hopes of a potential approval. The firm will also look towards expanding the Vectibix (panitumumab) franchise for first- and second-line metastatic colorectal cancer with the EMA.

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