Amgen (AMGN) Down 7.9% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Amgen (AMGN). Shares have lost about 7.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amgen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Q3 Earnings Top, Sales View Tightened

Amgen reported third-quarter 2021 earnings of $4.67 per share, which beat the Zacks Consensus Estimate of $4.22. Earnings rose 11% year over year due to higher revenues, lower costs and lower share count.

Total revenues of $6.71 billion marginally beat the Zacks Consensus Estimate of $6.70 billion. Total revenues rose 4% year over year as higher volumes offset lower net selling prices of several drugs.

Volume-driven growth of Repatha, Prolia, and Evenity and some biosimilar drugs drove the top line in the quarter. However, the lingering effects of COVID-19 and increased competitive pressure on some drugs continued to hurt sales.

Though the company continues to see a recovery in patient visits and diagnoses rates, new patient starts remain suppressed due to a gap in doctor office visits amid the pandemic, a trend management expects to hurt its business in the fourth quarter too.

Total product revenues rose 4% from the year-ago quarter to $6.32 billion (U.S.: $4.56 billion; ex-U.S.: $1.76 billion). Volumes rose 8%, driven by strong demand for Prolia, Blincyto, Evenity and Repatha. Net selling prices declined 7% as prices for some drugs remained under pressure. Sales in the quarter also benefited from $147 million of favorable changes to estimated sales deductions related to prior periods.

Other revenues of $386 million rose 21% year over year aided by shipments to Lilly under a collaboration for the manufacture of COVID-19 antibodies.

Performance of Key Drugs

Prolia revenues came in at $803 million, up 15% from the year-ago quarter driven by double-digit volume growth as new and repeat patient volumes continued to recover from the impact of the pandemic as osteoporosis diagnosis rates reached almost 90% of pre-COVID levels.

Evenity recorded sales of $149 million in the quarter, up more than 100% year over year driven by strong volume growth in the United States due to growing demand trends in new patients.

Xgeva delivered revenues of $517 million, up 7% from the year-ago quarter driven by volume growth, which offset the impact of lower prices.

Kyprolis recorded sales of $293 million, up 13% year over year due to higher volumes supported by increased use of Kyprolis in combination with Darzalex plus dexamethasone.

Repatha generated revenues of $272 million, up 33% year over year, as higher volume was partially offset by lower prices due to an increase in Medicare Part D patients receiving Repatha and entering the coverage gap (donut hole).

Vectibix revenues came in at $200 million, up 4% year over year. Nplate sales rose 29% to $273 million. Blincyto sales increased 40% from the year-ago period to $125 million.

Parsabiv recorded sales of $61 million, down 67% due to changes in reimbursement rules for the drug, which hurt its volumes.

Aimovig recorded sales of $79 million in the quarter, down 25% year over year due to lower net selling price and pressure from oral competition.

Sales of Otezla were $609 million in the quarter, up 13% due to volume growth and favorable adjustment to estimated sales deductions, which offset the impact of lower selling prices. Moreover, potential approval for the mild-to-moderate psoriasis indication in the United States could bring in additional sales for Otezla.

Amgen’s newly approved drug, Lumakras (sotorasib) recorded sales of $36 million in the quarter.

More than 500 oncologists have prescribed Lumakras in both academic and community settings. KRAS testing of metastatic NSCLC patients stands at approximately 75%, compared to 70% in second quarter.

In biosimilars, sales of Kanjinti were $116 million, down 31% year over year due to lower pricing as a result of increased competition, which offset the impact of higher volumes. Sales of Mvasi were $274 million in the quarter, up 19% year over year as volume growth was partially offset by lower net selling price.  Amjevita sales were $111 million in the quarter, up 39% year over year.

In the fourth quarter and onward, volume growth of biosimilars is expected to be offset by lower pricing due to increased competition.

Sales of mature drugs like Enbrel, Aranesp, Epogen and Neulasta declined due to an array of branded and generic competitors. Enbrel revenues of $1.29 billion declined 3% year over year due to lower volumes, inventory and price.

Aranesp revenues rose 3% from the prior-year quarter to $396 million. Revenues of the other ESA, Epogen, declined 7% to $138 million. Neulasta revenues declined 25% from the year-ago period to $415 million.

Amgen expects increased competition to result in additional erosion of these established products.

Operating Margins Rise

Adjusted operating margin rose 250 basis points (bps) to 54.6% due to lower operating costs. Adjusted operating expenses were almost flat at $3.25 billion. SG&A spend declined 5% to $1.26. R&D expenses declined 4% year over year to $997 million.

Adjusted tax rate was 13.6% for the quarter, a 0.5-point increase from the year-ago quarter.

Amgen repurchased 4.6 million shares worth $1.1 billion in the quarter and has $2.9 billion remaining under its stock repurchase authorization.

2021 Guidance

Amgen lowered the top end of its revenue guidance range for 2021 from $25.8 billion-$26.6 billion to $25.8 billion-$26.2 billion. However, the adjusted earnings per share guidance was raised from the range of $16.00 to $17.00 per share to $16.50 to $17.10.

In 2021, other revenues are expected to be in the range of $1.5 billion to $1.7 billion compared with 1.4 billion to 1.5 billion expected previously.

Adjusted operating costs are expected to increase at the rate of 3-4% from last year compared with 6-7% previously. While R&D costs are expected to increase in a mid-single-digit percentage range to support registration enabling lung and gastric cancer studies, SG&A expenses are expected to decline. The adjusted tax rate is expected in the range of 13% to 14% versus 13.5% to 14.5% previously.

Amgen plans to spend approximately $900 million for capital expenditures in 2021. The company expects to buy back shares at the upper end of the previously issued range of $3 billion to $5 billion through the year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Amgen has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Amgen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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