When Amgen ( AMGN) reports fourth-quarter and full-year earnings after the market close Thursday, expect the potential of its colorectal cancer treatment to be foremost on investors' minds.

The Street has high expectations for Vectibix, which was approved in September for patients who have failed other therapies.

The earnings results will be important as well, of course. Amgen has a solid track record of meeting or beating Wall Street's expectations. The Thousand Oaks, Calif., biotech company's earnings exceeded consensus estimates in the past three quarters and haven't missed the number since the fourth quarter of 2004.

Analyst consensus estimates call for earnings of 95 cents a share for the quarter and $3.93 for the full year on revenue of $3.77 billion and $14.19 billion respectively.

The revenue figure for Vectibix is not expected to be very meaningful to overall earnings this quarter. However, a higher sales total could indicate a quicker acceptance by doctors to use the drug, leading investors and analysts to extrapolate the beginning of a better-than-expected launch. I believe anything around $40 million will be construed as positive.

In November, Vectibix had already garnered 11% market share in third-line usage, according to Reuters. In a study conducted by Robert W. Baird in October, 13% of surveyed physicians had already used Vectibix, while 44% planned on using it in the next 90 days. Furthermore, 12% and 18% of those surveyed planned on using Vectibix off-label in first- and second-line treatment.

In conjunction with the earnings release, Amgen is slated to report phase III results of a study combining Vectibix with chemotherapy agent FOLFOX and Genentech's ( DNA) Avastin, vs. FOLFOX and Avastin alone, in first-line colorectal cancer treatment.

Earlier in the month, shares of ImClone Systems ( IMCL) jumped after positive first-line data were reported on Erbitux. The drug is currently approved for second- and third-line use. However, the Vectibix data are expected to be more significant because Vectibix is combined with Avastin, the standard of care in fighting colon cancer.

Wall Street is anticipating positive results, and it's quite possible investors will react to that piece of news more so than the earnings.

However, there is no doubt that the earnings numbers will be scrutinized. So here's what to look for.

Last quarter, Amgen beat the consensus by improving gross margins and paying a lower tax rate. Don't look for the same boost in this quarter. Costs of goods sold came in at $485 million last quarter, sharply below the consensus estimate of $546 million. Analysts expect the number to rise to $529 million in the fourth quarter. Research-and-development expenses should climb as well.

David Miller, president of Biotech Stock Research, is interested to see what management says about future acquisitions. He believes that if the company misses its numbers, it will spend more time discussing plans to acquire revenue.

Other Specific Products

Karen Andersen, an analyst with Morningstar, is not optimistic about Enbrel sales. The arthritis and psoriasis drug is forecast to bring in $727 million in revenue, according to the consensus. But Andersen is concerned that the high patient co-payments will put a dent in sales.

At the JPMorgan Healthcare Conference earlier this month, I reported that CEO Kevin Sharer commented that third-quarter Enbrel sales were disappointing because of a lack of growth in the psoriasis market. However, on the third-quarter conference call, competition was cited as a reason for the shortfall.

Investors will also be eager to see what management has to say about the company's anemia products, Aranesp and Epogen, in connection with its patent infringement lawsuit against Roche. The Swiss drugmaker could introduce CERA, a competing therapy, around the middle of 2007.

Here's a cheat sheet for consensus estimates by product:


Amgen's Product Line
Product Consensus Sales Estimate
Aranesp $1.1B
Epogen $643M
Neulasta $737M
Neupogen $307M
Enbrel $727M
Sensipar $91M
Source: Robert W. Baird

In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.

Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86, 87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback; click here to send him an email.

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