Analyst Conference Summary

biotechnology

Amgen
AMGN

conference date: February 2, 2017 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2016 (fourth quarter, Q4)


Forward-looking statements

Overview: Solid growth and good new Repatha clinical data. But predicting 2017 revenue about flat from 2016.

Basic data (GAAP):

Revenue was $5.97 billion, up 3% sequentially from $5.81 billion, and up 8% from $5.54 billion in the year-earlier quarter.

Net income was $1.94 billion, down 4% sequentially from $2.02 billion, and up 8% from $1.80 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.59, down 3% sequentially from $2.68, and up 9% from $2.37 year-earlier.

Guidance:

For full year 2017 revenue expected between $22.3 and $23.1 billion. GAAP EPS $10.45 to $11.31. Non-GAAP EPS $11.80 to $12.60. Capital expenditures about $700 million. Will spend between $2.5 billion and $3.5 billion on share repurchases.

Conference Highlights:

Robert A. Bradway, CEO said "We anticipate several new product development opportunities and launches in 2017, and are excited about the Repatha cardiovascular outcomes data we released today. We have established a firm foundation for longer-term growth."

Details of the new Repatha data will be released on March 17 at the American College of Cardiology meeting.

Three new products are rapidly approaching the market: Evenity (romosozumab) for osteoporosis, Erenumab for migraine, and Parsabiv for hyperthyroidism secondary to chronic kidney disease.

Non-GAAP numbers: net income was $2.16 billion, down 5% sequentially from $2.28 billion, and up 9% from $1.99 billion year-earlier. EPS was $2.89, down 4% sequentially from $3.02 and up 11% from $2.61 year-earlier. Excludes acquisition related and stock-based compensation expenses and other charges.

Product sales were $5.66 billion, up 3% sequentially from $5.52 billion, and up 6% y/y from $5.33 billion, with $4.51 billion in the U.S. and $1.16 billion international. Non-product revenue was $302 million, up sequentially from $295 million and up from $207 million year-earlier, driven by a large milestone payment.

Product sales
$ millions
Q4 2016
Q3 2016
Q4 2015
y/y %
Neulasta
$1,116
$1,200
$1,156
-3%
Neupogen
173
183
263
-34%
Enbrel
1,582
1,452
1,441
14%
Arenesp
526
531
499
5%
Epogen
316
335
342
-8%
Sensipar
411
415
384
7%
Vectibix
143
164
135
6%
Nplate
150
151
137
9%
Xgeva
376
394
356
6%
Prolia
463
379
380
22%
Kyprolis
183
183
148
24%
Blincyto
29
29
22
32%
Repatha
58
40
7
729%
other
75
60
59
27%

Epogen and Neupogen continue to be hurt by biosimilar competition. The main Epogen client, DaVita, extended a supply agreement to 2022, but at a greater discount.

On October 31, the Enbrel royalty payments ceased, helping with margins.

In 2017 believes competition will limit product price increases, including for Enbrel.

Cash and equivalents balance ended at $38.1 billion, up slightly sequentially from $38.0 billion. Operating cash flow $3.1 billion. Free cash flow was $2.9 billion. At the end of quarter outstanding debt was $34.6 billion at an average of % interest. Capital expenditures $0.2 billion. $1.0 billion worth of shares were repurchased in the quarter. Dividend payments were $0.7 billion.

AMG 334, or Erenumab for migraines reported positive results in Q3 and a second study in Q4. Partnered with Novartis. Regulatory submissions scheduled for Q2 2017.

ABP 215 (Avastin biosimilar) for non-small cell lung cancer (NSCLC) is being completed global regulatory submissions. ABP 501 received a positive opinion from the CHMP.

Biosimilar to Rituximab, ABP 798 continued enrolling its Phase 3 trial. ABP 710, Infliximab also continued Phase 3.

Romosozumab (Evenity) for postmenopausal osteoporosis has a PDUFA date on July 19, 2017.

CNP520 is in a Phase 3 study for Alzheimer's disease for patients with a strong genetic predisposition to it. Partnered with Novartis.

Parsabiv was granted marketing authorization in Europe and has a February 9, 2017 PDUFA date in the U.S.

See also the Amgen pipeline.

Cost of sales was $1.07 billion. Research and development expense was $1.08 million; selling general and administrative expense $1.32 billion; and other expense $12 million, for total operating expenses of $3.48 billion. Operating income was $2.49 billion. Interest and other expense net was $202 million, income taxes $348 million.

For the full year 2016 revenue was $23.0 billion, up 6% y/y from $21.7 billion. GAAP EPS was $10.24, non-GAAP EPS $11.65, up 12% y/y. GAAP net income was $7.72 billion; non-GAAP was $8.79 billion.

Q&A:

Repatha neurocognitive endpoint details? You have to wait for the presentation in March.

We still believe in the Amyloid Hypothesis for Alzheimer's. We think, however, that once Alzheimer's has developed, it may be too late to intervene.

Mortality endpoints for Repatha? Timeline? Don't draw conclusions based on the absence of statements in the press release. We are working on putting together a filing, we are working as fast as we can.

Commitment to hiring 1,500 more workers in the U.S. to Trump? These jobs were already in our plans for 2017, they reflect our plans for long-term growth. It includes starting the neurology franchise, bone health, and headquarters staff for international expansion support.

2017 guidance, Repatha access, lawsuit? Litigation has a range of possible outcomes. Uptake also has a range, depending on payer responses. We can't promote the outcomes data until it is in the label.

2017 guidance has minimal price increases built in, and the Epogen increased discount.

While we are working to reduce costs, we are introducing new products, and expanding products internationally, which will add to costs. Most of the reduction in Enbrel royalty costs should drop to the bottom line.

Capital allocation, using cash to make a large acquisition? We have a lot of flexibility in our balance sheet to do acquisitions. Visibility on future taxes, including internationally, would be helpful.

 

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Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2017 William P. Meyers