Amgen Reports Fourth Quarter And Full Year 2018 Financial Results

THOUSAND OAKS, Calif., Jan. 29, 2019 /PRNewswire/ -- Amgen (NASDAQ:AMGN) today announced financial results for the fourth quarter and full year 2018 in comparison to comparable periods in 2017. Key results include:

• For the fourth quarter, total revenues increased 7 percent to $6.2 billion.
• Product sales grew 8 percent globally. New and recently launched products including Repatha^® (evolocumab), Prolia^® (denosumab), KYPROLIS^® (carfilzomib) and XGEVA^® (denosumab) showed double-digit growth.
• For the full year, total revenues increased 4 percent to $23.7 billion, with 3 percent product sales growth.
• GAAP earnings per share (EPS) increased to $3.01 in the fourth quarter and to $12.62 for the full year driven by higher total revenues, a lower tax rate as the prior year was impacted by U.S. tax reform and lower weighted-average shares outstanding.
• For the fourth quarter, GAAP operating income increased 6 percent to $2.4 billion and GAAP operating margin decreased 0.6 percentage points to 39.7 percent. For the full year, GAAP operating income increased 3 percent to $10.3 billion and GAAP operating margin decreased 0.3 percentage points to 45.5 percent.
• Non-GAAP EPS increased 18 percent in the fourth quarter to $3.42 and 14 percent for the full year to $14.40 driven by higher total revenues, a lower tax rate and lower weighted-average shares outstanding.
• For the fourth quarter, non-GAAP operating income increased 6 percent to $2.7 billion and non-GAAP operating margin decreased 0.6 percentage points to 45.3 percent. For the full year, non-GAAP operating income increased 2 percent to $11.9 billion and non-GAAP operating margin decreased 0.9 percentage points to 52.6 percent.
• The Company generated $10.6 billion of free cash flow for the full year versus $10.5 billion in 2017.
• 2019 total revenues guidance of $21.8-$22.9 billion; EPS guidance of $11.55-$12.75 on a GAAP basis and $13.10-$14.30 on a non-GAAP basis.

"Through our continued solid operating performance in 2018, we met and exceeded our long-term financial commitments," said Robert A. Bradway, chairman and chief executive officer. "Looking to the future, we are encouraged by our long-term growth prospects driven by our portfolio of newer products, pipeline and ongoing success in international expansion."

Product Sales Performance

• Total product sales increased 8 percent for the fourth quarter of 2018 versus the fourth quarter of 2017. Product sales grew 3 percent for the full year.
• Repatha sales increased 62 percent for the fourth quarter and 72 percent for the full year driven by higher unit demand, offset partially by lower net selling price.
• BLINCYTO^® (blinatumomab) sales increased 37 percent for the fourth quarter and 31 percent for the full year driven by higher unit demand.
• XGEVA sales increased 17 percent for the fourth quarter and 13 percent for the full year driven primarily by higher unit demand.
• Prolia sales increased 14 percent for the fourth quarter and 16 percent for the full year driven primarily by higher unit demand.
• KYPROLIS sales increased 11 percent for the fourth quarter and 16 percent for the full year driven by higher unit demand, offset partially by net selling price.
• Nplate^® (romiplostim) sales increased 10 percent for the fourth quarter and 12 percent for the full year driven by higher unit demand.
• Sensipar/Mimpara^® (cinacalcet) increased 8 percent for the fourth quarter driven by favorable changes in accounting estimates related to prior periods and higher net selling price, offset partially by lower unit demand. Sales increased 3 percent for the full year driven primarily by higher net selling price, offset partially by lower unit demand.
• Vectibix^® (panitumumab) sales increased 6 percent for the fourth quarter and 8 percent for the full year driven by higher unit demand.
• Neulasta^® (pegfilgrastim) sales increased 5 percent for the fourth quarter driven by higher unit demand due primarily to an order from the U.S. government, offset partially by lower net selling price. Sales decreased 1 percent for the full year driven by favorable changes in accounting estimates in the prior year, offset partially by favorable changes in inventory.
• Parsabiv^® (etelcalcetide) was launched in the U.S. in the first quarter of 2018 and sales grew 18 percent sequentially in the fourth quarter.
• Aimovig^® (erenumab-aooe) was launched in the U.S. in the second quarter of 2018 and generated $95 million in sales in the fourth quarter.
• EPOGEN^® (epoetin alfa) sales decreased 2 percent for the fourth quarter driven by lower net selling price, offset partially by higher unit demand. Sales decreased 8 percent for the full year driven primarily by lower net selling price.
• Aranesp^® (darbepoetin alfa) sales decreased 3 percent for the fourth quarter driven primarily by unfavorable changes in inventory levels and lower net selling price. Sales decreased 9 percent for the full year driven by lower unit demand.
• Enbrel^® (etanercept) sales decreased 8 percent for the fourth quarter and the full year driven by lower unit demand and lower net selling price.
• NEUPOGEN^® (filgrastim) sales decreased 40 percent for the fourth quarter driven by lower net selling price and lower unit demand. Sales decreased 34 percent for the full year driven by lower unit demand and lower net selling price.

Product Sales Detail by Product and Geographic Region

Operating Expense, Operating Margin and Tax Rate Analysis

On a GAAP basis:

• Total Operating Expenses increased 8 percent in the fourth quarter and 5 percent for the full year.  All expense categories benefited from savings from our transformation and process improvement efforts. Cost of Sales margin decreased 0.7 points in the fourth quarter due to lower royalty cost and the impact of Hurricane Maria charges in Q4 2017, offset partially by higher cost of manufacturing and higher acquisition-related intangibles amortization. For the full year, Cost of Sales margin decreased 0.5 points due to lower royalty cost, the favorable comparison to Hurricane Maria-related charges in 2017 and lower acquisition-related intangibles amortization, offset partially by higher cost of manufacturing. Research & Development (R&D) expenses increased 13 percent in the fourth quarter driven by higher spending on business development, our early oncology pipeline and late-stage development, offset partially by lower spending to support marketed products. For the full year, R&D expenses increased 5 percent driven by higher spending on our early pipeline, late-stage development and business development, offset partially by lower spending to support marketed products. Selling, General & Administrative (SG&A) expenses increased 9 percent in the fourth quarter due primarily to investments in product launches and marketed product support, offset partially by the favorable comparison to Hurricane Maria-related charges in Q4 2017. For the full year, SG&A expenses increased 9 percent due primarily to investments in product launches and marketed product support.
• Operating Margin decreased 0.6 percentage points in the fourth quarter to 39.7 percent, and decreased 0.3 percentage points for the full year to 45.5 percent.
• Tax Rate decreased in the fourth quarter and the full year due to the impacts of U.S. corporate tax reform.

On a non-GAAP basis:

• Total Operating Expenses increased 8 percent in the fourth quarter and 6 percent for the full year. All expense categories benefited from savings from our transformation and process improvement efforts. Cost of Sales margin decreased 1.1 points in the fourth quarter due to lower royalty cost and the impact of Hurricane Maria charges in Q4 2017, offset partially by higher cost of manufacturing. For the full year, Cost of Sales margin decreased 0.2 points due to lower royalty cost and the favorable comparison to Hurricane Maria-related charges in 2017, offset partially by higher cost of manufacturing. R&D expenses increased 13 percent in the fourth quarter driven by higher spending on business development, our early oncology pipeline and late-stage development, offset partially by lower spending to support marketed products.  For the full year, R&D expenses increased 5 percent driven by higher spending on our early pipeline, late-stage development and business development, offset partially by lower spending to support marketed products. SG&A expenses increased 9 percent in the fourth quarter primarily due to investments in product launches and marketed product support, offset partially by the favorable comparison of Hurricane Maria-related charges in Q4 2017. For the full year, SG&A expenses increased 10 percent due primarily to investments in product launches and marketed product support.
• Operating Margin decreased 0.6 percentage points in the fourth quarter to 45.3 percent, and decreased by 0.9 percentage points for the full year to 52.6 percent.
• Tax Rate decreased 3.3 percentage points in the fourth quarter and 4.5 percentage points for the full year primarily due to the impacts of U.S. corporate tax reform.

Cash Flow and Balance Sheet

• The Company generated $3.0 billion of free cash flow in the fourth quarter of 2018 versus $2.9 billion in the fourth quarter of 2017. The Company generated $10.6 billion of free cash flow for the full year 2018 versus $10.5 billion in 2017 due primarily to improvements in working capital, offset partially by higher tax payments.
• The Company's fourth quarter 2018 dividend of $1.32 per share was paid on Dec. 7, 2018, representing a 15 percent increase versus the fourth quarter of 2017.  The Company's first quarter 2019 dividend of $1.45 per share declared on Dec. 7, 2018, will be paid on March 8, 2019, to all stockholders of record as of Feb. 15, 2019, representing a 10 percent increase from that paid in each of the previous four quarters.
• During the fourth quarter, the Company repurchased 11.1 million shares of common stock at a total cost of $2.2 billion. For the full year, the Company repurchased 94.5 million shares of common stock at a total cost of $17.9 billion. At the end of the fourth quarter, the Company had $5.1 billion remaining under its stock repurchase authorization.

2019 Guidance
For the full year 2019, the Company expects:

• Total revenues in the range of $21.8 billion to $22.9 billion.
• On a GAAP basis, EPS in the range of $11.55 to $12.75 and a tax rate in the range of 12.5 percent to 13.5 percent.
• On a non-GAAP basis, EPS in the range of $13.10 to $14.30 and a tax rate in the range of 14.0 percent to 15.0 percent.
• Capital expenditures to be approximately $700 million.

Fourth Quarter Product and Pipeline Update
The Company provided the following updates on selected product and pipeline programs:

BLINCYTO

• In January, the European Commission approved an expanded current indication to include adult patients with Philadelphia chromosome negative CD19 positive B-cell precursor acute lymphoblastic leukemia in first or second complete remission with minimal residual disease (MRD).

Nplate

• In December, the Company submitted a supplemental Biologics License Application (sBLA) to the U.S. Food and Drug Administration (FDA) to include the treatment of adult patients with immune thrombocytopenia (ITP) who have had ITP for 12 months or less and an insufficient response to corticosteroids, immunoglobulins or splenectomy.
• In December, the FDA approved the sBLA for the treatment of pediatric patients one year of age and older with ITP for at least six months who have had an insufficient response to corticosteroids, immunoglobulins or splenectomy.

Repatha

• In January, the National Medical Products Administration approved a new indication for Repatha as the first PCSK9 inhibitor in China for adults with established atherosclerotic cardiovascular disease to reduce the risk of myocardial infarction, stroke and coronary revascularization.

EVENITY^TM (romosozumab)

• In January, the Japanese Ministry of Health, Labor and Welfare granted a marketing authorization for the treatment of osteoporosis in men and postmenopausal women at high risk of fracture.
• In January, the FDA Bone, Reproductive and Urologic Drugs Advisory Committee voted in favor of approval for the treatment of osteoporosis in postmenopausal women at high risk for fracture.

KANJINTI™ (ABP 980)

• In December, a Biologics License Application (BLA) for KANJINTI, a biosimilar Herceptin (trastuzumab), was resubmitted to the FDA.

ABP 710

• In December and January, the Company submitted a BLA to the FDA, and a Marketing Authorization Application to the EMA, respectively, for ABP 710, a biosimilar candidate to REMICADE^® (infliximab).

EVENITY is developed in collaboration with UCB globally, as well as our joint venture partner Astellas in Japan
EVENITY and KANJINTI trade names provisionally approved by the FDA
Herceptin is a registered trademark of Genentech
Remicade is a registered trademark of Johnson and Johnson

Non-GAAP Financial Measures
In this news release, management has presented its operating results for the fourth quarters and full years of 2018 and 2017, in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2019 EPS and tax rate guidance in accordance with GAAP and on a non-GAAP basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items, including the repatriation tax on accumulated foreign earnings and other impacts of U.S. corporate tax reform, from the related GAAP financial measures. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the fourth quarters and full years of 2018 and 2017. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP.

The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor's overall understanding of the financial performance and prospects for the future of the Company's ongoing business activities by facilitating comparisons of results of ongoing business operations among current, past and future periods. The Company believes that FCF provides a further measure of the Company's liquidity.

The Company uses the non-GAAP financial measures set forth in the news release in connection with its own budgeting and financial planning internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

About Amgen
Amgen is committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics. This approach begins by using tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.

Amgen focuses on areas of high unmet medical need and leverages its expertise to strive for solutions that improve health outcomes and dramatically improve people's lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world's leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.

For more information, visit www.amgen.com and follow us on www.twitter.com/amgen.

Forward-Looking Statements
This news release contains forward-looking statements that are based on the current expectations and beliefs of Amgen. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including estimates of revenues, operating margins, capital expenditures, cash, other financial metrics, expected legal, arbitration, political, regulatory or clinical results or practices, customer and prescriber patterns or practices, reimbursement activities and outcomes and other such estimates and results. Forward-looking statements involve significant risks and uncertainties, including those discussed below and more fully described in the Securities and Exchange Commission reports filed by Amgen, including our most recent annual report on Form 10-K and any subsequent periodic reports on Form 10-Q and current reports on Form 8-K. Unless otherwise noted, Amgen is providing this information as of the date of this news release and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

No forward-looking statement can be guaranteed and actual results may differ materially from those we project. Our results may be affected by our ability to successfully market both new and existing products domestically and internationally, clinical and regulatory developments involving current and future products, sales growth of recently launched products, competition from other products including biosimilars, difficulties or delays in manufacturing our products and global economic conditions. In addition, sales of our products are affected by pricing pressure, political and public scrutiny and reimbursement policies imposed by third-party payers, including governments, private insurance plans and managed care providers and may be affected by regulatory, clinical and guideline developments and domestic and international trends toward managed care and healthcare cost containment. Furthermore, our research, testing, pricing, marketing and other operations are subject to extensive regulation by domestic and foreign government regulatory authorities. We or others could identify safety, side effects or manufacturing problems with our products, including our devices, after they are on the market. Our business may be impacted by government investigations, litigation and product liability claims. In addition, our business may be impacted by the adoption of new tax legislation or exposure to additional tax liabilities. While we routinely obtain patents for our products and technology, the protection offered by our patents and patent applications may be challenged, invalidated or circumvented by our competitors, or we may fail to prevail in present and future intellectual property litigation. We perform a substantial amount of our commercial manufacturing activities at a few key facilities, including in Puerto Rico, and also depend on third parties for a portion of our manufacturing activities, and limits on supply may constrain sales of certain of our current products and product candidate development. We rely on collaborations with third parties for the development of some of our product candidates and for the commercialization and sales of some of our commercial products. In addition, we compete with other companies with respect to many of our marketed products as well as for the discovery and development of new products. Discovery or identification of new product candidates or development of new indications for existing products cannot be guaranteed and movement from concept to product is uncertain; consequently, there can be no guarantee that any particular product candidate or development of new indications for existing products will be successful and become a commercial product. Further, some raw materials, medical devices and component parts for our products are supplied by sole third-party suppliers. Certain of our distributors, customers and payers have substantial purchasing leverage in their dealings with us. The discovery of significant problems with a product similar to one of our products that implicate an entire class of products could have a material adverse effect on sales of the affected products and on our business and results of operations. Our efforts to acquire other companies or products and to integrate the operations of companies we have acquired may not be successful. A breakdown, cyberattack or information security breach could compromise the confidentiality, integrity and availability of our systems and our data. Our stock price is volatile and may be affected by a number of events. Our business performance could affect or limit the ability of our Board of Directors to declare a dividend or our ability to pay a dividend or repurchase our common stock. We may not be able to access the capital and credit markets on terms that are favorable to us, or at all.

CONTACT: Amgen, Thousand Oaks
Trish Hawkins, 805-447-5631 (media)
Arvind Sood, 805-447-1060 (investors)