Amgen Bumps Up Guidance

Third-quarter earnings beat estimates, although the stock falls on Aranesp concerns.
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Updated from 5 p.m. EDT

Amgen's

(AMGN) - Get Report

third-quarter earnings dropped 61% from a year ago after acquisition charges, but the biotech giant raised its guidance for the year on stronger operating results.

The company earned $236 million, or 18 cents a share, in the quarter, down from $612 million, or 46 cents a share, in the same quarter last year. Excluding charges related to the acquisition of Tularik, another biotech company, it earned 64 cents a share, up from last year's 53 cents a share, beating Wall Street's consensus estimate that called for 62 cents a share.

"I could not be happier about the company's performance, but we are experiencing some discontinuity in our performance," said Kevin Sharer, Amgen's chairman and CEO. "We're dealing with this in the prudent way, and in the long term, it's going to be smart."

The biotech now expects adjusted earnings per share for the year of $2.38 to $2.43, up from the previous range of $2.30 to $2.40.

Sales added 23% to $2.7 billion in the third quarter, up from last year's $2.2 billion. U.S. drug sales were $2.1 billion, an increase of 20% over last year, while international sales brought in $419 million, a 31% increase excluding the impact of foreign exchange.

The major disappointment in the report on Wall Street was the 1% sequential drop in sales of Aranesp, a drug for anemia in kidney dialysis and cancer patients. Year-over-year sales growth for the drug was 39% to $608 million, but the results were lower than expectation.

On a conference call with analysts, Sharer attributed light sales of Aranesp to greater-than-expected pricing discounts for the drug.

"We're gaining market share, and the discounts are the price of our success," he said. "Our market share has grown from 30% to 40% over the last year."

Sharer encouraged investors not to look at sales growth on a quarter-to-quarter basis, saying that Aranesp sales numbers were likely inflated in the second quarter and probably understated in the third.

"I think we'll see a pretty smooth growth rate going forward," he said.

Sales of Epogen were $681 million for the third quarter of 2004, an increase of 9%, while sales of Neulasta and Neupogen increased 14% to $752 million. Enbrel, Amgen's leading biologic for inflammation, posted sales of $496 million, a 45% jump.

"It's intensely competitive, but we're holding our own and we raised our guidance by $100 million for Enbrel for the year," Sharer said.

During the quarter, Amgen's share repurchases totaled $1.4 billion, or about 24 million shares. Capital expenditures in the third quarter were $298 million compared to $388 million for the same period a year ago. The company's cash and marketable securities were $3.8 billion at the end of the quarter.

Also, Amgen said a federal court recently affirmed its patents on erythropoietin, which means the patents are being infringed upon by

Transkaryotic Therapies

(TKTX)

and

Aventis Pharmaceuticals

(AVE)

.

"This ruling is a strong endorsement of our patents," said Sharer. "We will continue to vigorously defend our intellectual property."

The stock was recently down 90 cents, or 1.6%, to $55.51 in after-hours trading, after losing 0.4% during Wednesday's session.