Amgen Climbs on Profit Beat (Update) - TheStreet

Amgen

(AMGN) - Get Report

announced a 2% profit decline but rocked Wall Street estimates and raised guidance after the market close Monday.

The earnings beat, supported by better-than-expected sales of the biotech company's beleaguered anemia drugs, came on the tail of

positive late-stage trial data

for its lead pipeline prospect, bone-drug denosumab.

Enthused by the denosumab, or dmab, results, investors lifted shares $6.56, or 12%, to close Monday's regular session at $60.48. In after-hours trading, the stock was rising another 2.8% on earnings.

Amgen reported adjusted profit of $1.235 billion, down 2% from $1.265 billion a year prior, and earnings per share of $1.14 a share, up 2% from $1.12 a share a year prior.

Revenue increased 1% year over year to $3.76 billion -- analysts surveyed by Thomson Reuters were looking for a mere $1.02 a share on revenue of $3.58 billion.

On a GAAP basis, the company reported an 8% decline in profit to $941 million from $1.019 billion in the prior-year period. The company said it earned 87 cents a share on a GAAP basis, down 3 cents year over year.

Aranesp sales, which trounced targets, increased sequentially but were still down 13% year over year, including a 5% benefit from foreign exchange. Aranesp and Epogen brought in $825 million and $622 million, vs. Street expectations for $740 million and $582 million, respectively.

Safety, regulatory and reimbursement issues have plagued Amgen's anemia-drug franchise, and more label revisions are likely to be established in the second half of the year.

Amgen CEO Kevin Sharer said on Monday's call that in light of the upcoming label changes, he expects Aranesp sales to enter 2009 at a lower rate and, and that those anticipated declines are factored into current comments and guidance (below).

Meanwhile, Neupogen and Neulasta revenue amounted to $1.2 billion, exceeding the $1.1 billion expectation. This increase was primarily driven by an increase in the average net sales price and to a lesser extent an increase in units, according to the company.

Sales of Enbrel, a treatment for immune diseases such as rheumatoid arthritis and psoriasis, were $841 million, vs. expectations for $855 million. Amgen said growth was driven by increases in net sales price and patients, partially offset by unfavorable changes in wholesaler inventory levels.

Dmab Data

Following Friday's closing bell, Amgen said that in a three-year, late-stage trial in 7,800 women with osteoperosis, treatment with dmab resulted in a statistically significant reduction in the incidence of new vertebral fractures vs. placebo. Women in the dmab arm also had a statistically significant reduction in new non-vertebral and hip fractures, compared to placebo.

Key is the translation of bone mineral density increases into a reduction in fractures. Also key is the rate and kind of adverse, serious events were similar between the dmab and placebo arms. The company said these included serious infections and noeplasms, allaying some fears about safety limitations. Full data, however, won't be presented until September.

"Data thus far is minimal, but we believe this rules out a downside scenario of risk to approval, and leaves open the possibility of an upside scenario of dmab being a best-in-class, first line agent," wrote JP Morgan analyst Geoffrey Meacham, who has a neutral rating for the stock. The analyst also noted we've yet to see how the magnitude of the fracture benefits compare to approved drugs.

According to Lazard's Joel Sendek, who has a hold rating for Amgen, we can expect a dmab filing for FDA approval by the end of this year, with a potential approval in the third quarter of 2009.

"Three indications for Denosumab in bone disease provide large opportunities for Amgen," wrote Sendek, who forecasts $92 million in dmab sales in 2009 and $600 million in 2010.

"While data from Phase II and Phase III trials of dmab have been consistently positive, the total risk/benefit profile of the molecule has remained elusive," wrote Rodman and Renshaw's Michael King, who upgraded the stock to market outperform on Sunday. "However, with the announcement that the incidence and severity of adverse events in the FREEDOM trial were similar between dmab- and placebo-treated patients, we now view the drug's status as a future blockbuster to be secure, in our opinion."

Raised Outlook

Looking ahead, Amgen raised its revenue guidance to between $14.6 billion and $14.9 billion, from a prior range of $14.2 billion to $14.6 billion. On a per-share basis, the company anticipates adjusted profit of between $4.25 and $4.45 a share, up from a prior range of between $4 and $4.30 a share.

The new guidance exceeds the expectations of analysts surveyed by Thomson Reuters, who project earnings of $4.19 a share on revenue of $14.42 billion for the year.

"Overall we are impressed with the high-quality 2Q beat, and view the increase to guidance as a meaningful positive," wrote JP Morgan's Meacham in a post-earnings note Monday. "However, we are maintaining our Neutral rating given that we believe denosumab upside is already priced into the stock and its risks to the core anemia business."