conference date: October 24, 2007 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2007 (3nd quarter)
Overview: Stalled revenue growth and one-time write-offs are not a pretty picture.
Revenue was $3.6 billion, down 3% sequentially from $3.73, and flat from $3.6 billion year-earlier.
Net income was $201 million, down 80% sequentially from $1.02 billion and down 82% from $1.1 billion year-earlier.
EPS (earnings per share) were $0.18, down 80% sequentially from $0.90 and down 81% from $0.94 year-earlier.
Cash and equivalents ended at $5.95 billion, but debt is $11.3 billion.
Reaffirmed its 2007 adjusted EPS range of $4.13 to $4.23.
It has been a challenging year. Amgen adapted to challeges well with aggressive restructuring. Addressing safety issues for ESA.
Non-GAAP EPS (earnings per share) were $1.08, up 4% from $1.04 year-earlier. Non-GAAP net income was $1.18 billion, down 4% from $1.22 billion year-earlier. Stock option expense was $0.02 per share.
GAAP results were hit by a $590 million write-off of acquired research and development expense from the Alantos and Ilypsa acquisitions, a $293 million charge for asset impairment, and a $90 million inventory write-off.
ESA (Erythropoiesis Stimulating Agent) products, notably Arenesp, have been subject to regulatory and reimbursement changes, necessitating global restructuring. The pre-tax charges for restructuring will run $775 to $850 million, of which $582 million have already been taken, including in Q3. Remainder will be in Q4 2007, or possibly later. Should result in annual savings of $1 to $1.3 billion by 2008.
"ESA product sales were adversely affected by regulatory and reimbursement changes," according to Kevin Sharer.
Product sales were $3.524 billion. U.S. sales were $2.81 billion, international sales $0.715 billion.
Arenesp revenues decreased 23% to $818 million (vs. year-earlier). In the U.S. the decline was 36%. Impact was high in Medicare patients, put also major for private patients. Believe peg-EPO (competitor) offers no clinical benefit over Arenesp.
Epogen revenues decreased 5% to $602 million. Dose and price decreased. Won patent trial.
Neulasta and Neupogen revenues increased 10% to $1.1 billion.
Enbrel sales increased 16% y/y to $821 million. Applied to extend label to pediatric patients.
Sensipar sales increased 47% to $122 million. Vectibix sales were $41 million, down 9% due to unfavorable Colorectal Cancer Evalution results. But it was recommended for approval in the EU for patients with specific biomarkers (KRAS genes). The Phase III trial protocols are being adjusted, which will extend the timeline for completion.
Cost of sales was $585 million (non-GAAP). R&D was $699 million. SG&A $804 million. Capital expenditures were $306 million. Operating expenses declined by 1% from year-earlier.
Romiplostim (AMG531), under development, was filed with FDA for treatment of thrombocytopenia + ITP patients. It met all key endpoints in Phase III study.
Denosumab studies? Data did show is a reversible process. Patients still have better bone density even after stopping dosing.
2008 guidance for R&D expense? Trying to adapt investment to revenue and produce good earnings under new circumstances. Committed to fully funding pipeline long term. Expect more post-market approval trials required for industry, which will push up R&D cost model.
Arenesp drop? Hospital segment in U.S., especially public health, our competitor did price cuts we could not match.
Timing of ESA relabeling? Complicated, important discussions. Trying to do a science-based good job and making good process.
Price erosion for anemia therapies? Too early to assess impact. More price competition in markets like Spain and Portugal. We are well-differentiated, so not that much impact on us.
Enbrel RA v. psoriasis? New competitors are trying to gain share with pricing.
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