February 24, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Analysts are digging a little deeper into Thousand Oaks, Calif.-based Amgen ’s financials after the release of its fourth quarter earnings conference call.
The fourth quarter earnings are interesting anyway. Revenues in the fourth quarter increased four percent to $5.536 billion, and product sales grew three percent, driven by Enbrel, Sensipar, Prolia, Kyprolis, and XGEVA. For the full year, total revenues increased eight percent to $21.662 billion with product sales growing by eight percent.
Now analysts are parsing every word executives made at its quarterly conference call, looking for more insight into the company’s plans and expectations. The Motley Fool pulled five executive quotes with the idea of adding depth to their analysis.
“In addition to our own pipeline of molecules,” said Robert Bradway, Amgen’s chief executive officer, at the conference call, “we expect to remain active in business development. When it comes to later stage opportunities, we would expect this to revolve around our six core areas which are hematology/oncology, cardiovascular, inflammation, bone health, nephrology and neuroscience.”
What The Motley Fool culls from this seemingly straightforward statement is that the company didn’t drill down on a specific therapeutic area. Sean Williams, writing for The Motley Fool, however, thinks one area investors can expect more activity in is immuno-oncology and hematology, particularly some licensing deals.
Another area of focus is cost-cutting, with Bradway indicating that the company had already cut gross costs by $700 million, and expecting another $400 million this year. It plans to cut about $1.5 billion in annual cost savings by 2018, which was outlined two years ago. The company appears to be cutting back on research and development costs to focus on drug trials, product launches and marketing campaigns. Williams writes, “Ultimately, the move has cost Amgen about 20 percent of its workforce, but it’s expected to boost operating margins from the high 30-percentile in 2013 to 52 to 54 percent by 2018.”
Speaking on the conference call, Anthony Hooper, executive vice president of global commercial operations, touched on the reimbursement issues related to the company’s new cholesterol drug, Repatha. “The strict payer utilization management criteria are limiting the uptick…. We continue to work with payers on evaluating the utilization management criteria to ensure that appropriate patients are able to receive Repatha through their plans.”
This undoubtedly is a disappointment to investors, because hopes were so high for the new product. Hooper indicates that the drug is getting about 80 percent coverage, but hasn’t been able to push it higher. Williams notes, “The reason there is such resistance is Repatha’s $14,100 annual wholesale costs, which is leaps and bounds higher than current standards of care for high LDL-cholesterol readings.”
The standard of care is currently statins, which are generally priced about $50 per month, or $600 per year. So if anything, it’s a little surprising they’ve managed 80 percent penetration, given the overall effectiveness and affordability of statins.
Another area of interest to investors and analysts is Amgen’s take on biosimilars. Hooper said, “We do not expect Neulasta or EPOGEN biosimilars in the U.S. until the end of 2016 at the earliest. Assuming potential competitors provide us 180 days’ notice between approval and launch.”
Amgen currently has nine biosimilars in its pipeline, one, ABP 501, to AbbVie ’s Humira, the best-selling drug in the world. The U.S. Food and Drug Administration (FDA) is expected to rule on it later this year.
However, Amgen is also facing competition from biosimilars. Williams writes, “Thankfully, Amgen has taken steps to mitigate this effect. Amgen has been pushing Aranesp as a next-generation treatment over Epogen, and its Neulasta OnPro Kit is slowly but surely rescoring Amgen important market share.”
And apparently Sean Harper, executive vice president of research and development disappointed analysts by suggesting that its drug Kyprolis wasn’t going to be rubber-stamped for newly diagnosed multiple myeloma patients. The drug has had some dazzling success in early trials for other cancer indications, so promising that the studies were halted early because of overwhelming efficacy. When asked if he expected the CLARION study for multiple myeloma to have the same effectiveness, he expressed doubt, although he did say it was a possibility.
“Kyprolis is integral to Amgen’s success,” writes Williams, “as is the company’s ability to expand this drug label.” A top-line readout is expected next year.
Amgen is currently trading for $144.62 per share. Shares traded on July 31 for $176.59, dropped to $132.24 on Sept. 28, spiked to $163.29 on Dec. 30, and was trading on Feb. 22, 2016 for $141.46.
