Amgen's Next Big Thing Make Take a Little Longer

Updated from 5:22 PM

Amgen(AMGN Quote) beat first-quarter earnings estimates by a penny Thursday, but warned of slower growth ahead because of approval delays for its new blockbuster anemia drug.

The Thousand Oaks, Calif.-company -- the Big Daddy of biotech -- said first quarter profits rose 15% year over year to $305 million, or 28 cents per share. Revenue totaled $798 million in the quarter, a 14% jump over the year-ago quarter, but below consensus estimates.

Wall Street analysts were expecting net income of 27 cents per share on $939.6 million in revenue, according to Multex.com.

Nearly all of Amgen's revenue is derived from two drugs, Neupogen, which fights infection in chemotherapy patients, and existing anemia drug Epogen. Demand for both drugs is slowing, the company acknowledged Thursday.

Amgen, and its shareholders, are waiting anxiously for the U.S Food and Drug Administration to approve Aranesp, the company's highly touted upgrade to Epogen, which will be used by patients undergoing dialysis treatment for kidney problems. Amgen was hoping for approval in March or April, but said Thursday the process is taking longer than anticipated.

"We are in labeling discussion with the FDA on Aranesp and I believe approval is very close," said Amgen Chairman and CEO Kevin Sharer, on the company's conference call with analysts, adding that the drug's approval in Europe is also imminent.

Amgen is testing Aranesp for use with cancer patients, with an FDA filing expected later this year.

But the delay in Aransep's approval is forcing Amgen to reset sales projections. The company is lowering 2001 sales guidance for Aranesp to between $100 million and $150 million, from $150 to $200 million. The company also said that the number of dialysis patients will grow from 5% to 6%, lower than previously forecast.

"This is a short-term disappointment for Amgen, but only short term because the company is going to sell the heck out of Aranesp," says John McCamant, editor of the Medical Technology Stock Letter. McCamant doesn't have a position in Amgen.

A little history lesson is useful here. When Amgen developed Epogen in 1985, it inked a pact with Johnson & Johnson(JNJ Quote), giving the drug maker all European rights to the drug, as well as all non-dialysis rights in the United States. But Amgen owns all the rights to Aranesp, which works better and has more uses than Epogen and is expected to eat heavily into J&J's sales.

By some estimates, Aranesp can be as much as $5 billion-a-year drug, if and when its use is expanded into the cancer market.

But bullish estimates like these are years off. Back to the present, Amgen is faced with slower short-term growth. The company said Thursday that total product sales growth rate would be in the low-double digits for 2001, instead of the high teens as previously predicted. Percentage growth of earnings per share for 2001 will also grow in the low-double digits, instead of the mid-teens rate previously forecast.

Analysts were expecting Amgen to earn $1.21 in 2001 on $4.3 billion in sales, according to Multex.com.

Investors reacted like they always do when companies take down estimates. Shares in Amgen fell $2.56 in after-hours trading Thursday to $53.38. Amgen closed the regular session at $55.94, down $2.46, or 4.2%.