Amgen Reports Second Quarter 2017 Financial Results

THOUSAND OAKS, Calif., July 25, 2017 /PRNewswire/ -- Amgen (NASDAQ:AMGN) today announced financial results for the second quarter of 2017. Key results include:

• Total revenues increased 2 percent versus the second quarter of 2016 to $5.8 billion.
  • Product sales grew 2 percent driven by Prolia^® (denosumab), Repatha^® (evolocumab) and KYPROLIS^® (carfilzomib).
• GAAP earnings per share (EPS) increased 18 percent to $2.91 driven by higher operating margins.
  • GAAP operating income increased 13 percent to $2.7 billion and GAAP operating margin increased 4.9 percentage points to 48.4 percent.
• Non-GAAP EPS increased 15 percent to $3.27 driven by higher operating margins.
  • Non-GAAP operating income increased 9 percent to $3.1 billion and non-GAAP operating margin increased 3.8 percentage points to 55.2 percent.
• 2017 EPS guidance increased to $10.79-$11.37 on a GAAP basis and $12.15-$12.65 on a non-GAAP basis; total revenues guidance revised to $22.5-$23.0 billion.
• The Company generated $2.1 billion of free cash flow.

"Our continued solid performance this quarter is yet another indication that we are on track to deliver on our long-term growth objectives," said Robert A. Bradway, chairman and chief executive officer. "Our newer products are registering strong volume-driven growth globally and we expect their contribution to continue to increase over time, offsetting declines in mature products."

References in this release to "non-GAAP" measures, measures presented "on a non-GAAP basis" and to "free cash flow" (computed by subtracting capital expenditures from operating cash flow) refer to non-GAAP financial measures. Adjustments to the most directly comparable GAAP financial measures and other items are presented on the attached reconciliations.  

Product Sales Performance

• Total product sales increased 2 percent for the second quarter of 2017 versus the second quarter of 2016.
• Repatha sales increased driven by higher unit demand.
• BLINCYTO^® (blinatumomab) sales increased 43 percent driven by higher unit demand.
• KYPROLIS sales increased 23 percent driven by higher unit demand.
• Prolia sales increased 15 percent driven primarily by higher unit demand.
• Nplate^® (romiplostim) sales increased 15 percent driven primarily by higher unit demand.
• Sensipar^®/Mimpara^® (cinacalcet) sales increased 10 percent driven primarily by net selling price.
• Aranesp^® (darbepoetin alfa) sales increased 6 percent driven by higher unit demand.
• Vectibix^® (panitumumab) sales increased 5 percent driven by higher unit demand.
• XGEVA^® (denosumab) sales increased 4 percent driven primarily by higher unit demand.
• Enbrel^® (etanercept) sales decreased 1 percent due to the impact of competition, offset partially by favorable changes in inventory and net selling price.
• Neulasta^® (pegfilgrastim) sales decreased 5 percent driven by lower unit demand.
• EPOGEN^® (epoetin alfa) sales decreased 12 percent driven primarily by net selling price.
• NEUPOGEN^® (filgrastim) sales decreased 30 percent driven primarily by the impact of competition.

Operating Expense, Operating Margin and Tax Rate Analysis

On a GAAP basis:

• Total Operating Expenses decreased 6 percent, with all expense categories reflecting savings from our transformation and process improvement efforts. Cost of Sales margin improved by 0.8 percentage points driven primarily by reduced royalties. Research & Development (R&D) expenses decreased 3 percent driven by lower spending required to support certain later-stage clinical programs. Selling, General & Administrative (SG&A) expenses decreased 6 percent due to the expiration of ENBREL residual royalty payments, offset partially by investments in product launches.
• Operating Margin improved by 4.9 percentage points to 48.4 percent.
• Tax Rate increased 0.2 percentage points.

On a non-GAAP basis:

• Total Operating Expenses decreased 5 percent, with all expense categories reflecting savings from our transformation and process improvement efforts. Cost of Sales margin improved by 0.8 percentage points driven primarily by reduced royalties. R&D expenses decreased 3 percent driven by lower spending required to support certain later-stage clinical programs. SG&A expenses decreased 7 percent due to the expiration of ENBREL residual royalty payments, offset partially by investments in product launches.
• Operating Margin improved by 3.8 percentage points to 55.2 percent.
• Tax Rate decreased 1.2 percentage points, reflecting discrete benefits associated with the effective settlement of certain state and federal tax matters and favorable changes in the geographic mix of earnings, offset partially by a prior year benefit associated with tax incentives.

Cash Flow and Balance Sheet

• The Company generated $2.1 billion of free cash flow in the second quarter of 2017 versus $2.5 billion in the second quarter of 2016, the difference driven by the timing of tax payments.
• The Company's second quarter 2017 dividend of $1.15 per share was paid on June 8, 2017, a 15 percent increase versus the second quarter of 2016.
• During the second quarter, the Company repurchased 6.2 million shares of common stock at a total cost of $1.0 billion. At the end of the second quarter, the Company had $2.5 billion remaining under its stock repurchase authorization.

2017 Guidance

For the full year 2017, the Company now expects:

• Total revenues in the range of $22.5 billion to $23.0 billion.
  • Previously, the Company expected total revenues in the range of $22.3 billion to $23.1 billion.
• On a GAAP basis, EPS in the range of $10.79 to $11.37 and a tax rate in the range of 16 percent to 18 percent.
  • Previously, the Company expected GAAP EPS in the range of $10.64 to $11.32. Tax rate guidance is unchanged.
• On a non-GAAP basis, EPS in the range of $12.15 to $12.65 and a tax rate in the range of 18.5 percent to 19.5 percent.
  • Previously, the Company expected non-GAAP EPS in the range of $12.00 to $12.60. Tax rate guidance is unchanged.
• Capital expenditures to be approximately $700 million.  

Second Quarter Product and Pipeline Update
Key development milestones:

The Company provided the following updates on selected product and pipeline programs:

Repatha

• In June, the Company announced the submission of a supplemental Biologics License Application (sBLA) to the U.S. Food and Drug Administration (FDA) and a variation to the marketing authorization to the European Medicines Agency (EMA) to include data from the 27,564-patient Phase 3 Repatha cardiovascular outcomes study.

KYPROLIS

• In July, the Phase 3 ASPIRE study met the key secondary endpoint of OS, demonstrating that KYPROLIS, lenalidomide and dexamethasone reduced the risk of death by 21 percent over lenalidomide and dexamethasone alone.
• In July, the Company announced the submission of a supplemental New Drug Application to the FDA and a variation to the marketing application to the EMA to include OS data from the Phase 3 head-to-head ENDEAVOR study.
• In June, a Phase 3 study evaluating KYPROLIS in combination with DARZALEX^® (daratumumab) and dexamethasone compared to KYPROLIS and dexamethasone alone in patients with relapsed or refractory multiple myeloma began enrollment.

XGEVA

• In June, the FDA accepted the sBLA seeking to expand the currently approved indication to include the prevention of SREs in patients with multiple myeloma, assigning a Feb. 3, 2018, Prescription Drug User Fee Act (PDUFA) target action date.

Vectibix

• In June, the FDA approved a label update for Vectibix to more precisely molecularly define patients with wild-type RAS metastatic colorectal cancer as first-line therapy in combination with FOLFOX and as monotherapy following disease progression after prior treatment with fluoropyrimidine, oxaliplatin, and irinotecan-containing chemotherapy.

BLINCYTO

• In July, the FDA approved the sBLA for BLINCYTO to include OS data from the Phase 3 TOWER study, converting BLINCYTO's accelerated approval to a full approval.  The approval also expanded the indication to include patients with Ph+ relapsed or refractory B-cell precursor acute lymphoblastic leukemia.

EVENITY

• In May, the Phase 3 active-comparator ARCH study in postmenopausal women with osteoporosis met the primary and the key secondary endpoints, and an imbalance in positively adjudicated cardiovascular serious adverse events was observed as a new safety signal.
• In July, the FDA issued a Complete Response Letter for the Biologics License Application (BLA) for EVENITY as a treatment for postmenopausal women with osteoporosis. The resubmission will include data from the Phase 3 ARCH study and the Phase 3 BRIDGE study evaluating EVENITY in men with osteoporosis, in addition to the Phase 3 FRAME study.

Aimovig (erenumab)

• In May, a BLA was submitted to FDA for the prevention of migraine based on data from pivotal studies in patients with episodic and chronic migraine. In July, FDA accepted the BLA and assigned a May 17, 2018, PDUFA target action date.

DARZALEX^® is a registered trademark of Janssen Biotech, Inc.
EVENITY™ trade name is provisionally approved by FDA
EVENITY™ is developed in collaboration with UCB globally, as well as our joint venture partner Astellas in Japan
Aimovig™ trade name is provisionally approved by FDA
Aimovig™ is developed in collaboration with Novartis AG

Non-GAAP Financial Measures
In this news release, management has presented its operating results for the second quarters of 2017 and 2016, in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2017 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 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 periods in 2017 and 2016. 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 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 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. If we fail to meet the compliance obligations in the corporate integrity agreement between us and the U.S. government, we could become subject to significant sanctions. Further, 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 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. 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 cannot be guaranteed and movement from concept to product is uncertain; consequently, there can be no guarantee that any particular product candidate 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. We may not be able to access the capital and credit markets on terms that are favorable to us, or at all. We are increasingly dependent on information technology systems, infrastructure and data security. 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.

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

SOURCE Amgen