Amgen: 2011 Financial Guidance Preview

THOUSAND OAKS, Calif. ( TheStreet) -- Amgen ( AMGN) is expected to offer detailed 2011 financial guidance on its fourth-quarter conference call Monday night, with investors focused particularly on what management says about the launch of two new drugs and whether the company is considering paying out a first-ever shareholder dividend.

Speaking about its 2011 financial outlook at the J.P. Morgan Healthcare Conference on June 12, Amgen said it would "grow" revenue and earnings excluding the impact of U.S. healthcare reform in 2011. Amgen pegged the cost of healthcare reform in 2011 at $400 million to $500 million, including excise fees after taxes in the range of $150 million to $200 million.

Current 2011 consensus has Amgen earning $5.26 a share on total revenue of $15.2 billion, according to Thomson Reuters. That works out to approximately 3% earnings growth on 1.5% revenue growth.

Historically, Amgen's initial guidance in January is conservative and below consensus, said ISI Group biotech analyst Mark Schoenebaum.

Amgen is in the midst of launching two new drugs expected to fuel the company's future growth as sales of its core anemia drug franchise slow down. Reimbursement hurdles slowed the initial uptake of Amgen's new osteoporosis drug Prolia in 2010 so investors will be listening for Amgen's management to discuss ways in which Prolia reimbursement is improving in 2011.

Prolia sales are expected to reach $206 million in 2011 and $416 million in 2012, according to consensus figures provided by Deutsche Bank biotech analyst Robyn Karnauskas. She believes investors are expecting too much from Prolia and she forecasts sales of $174 million and $332 million in 2011 and 2012, respectively.

Amgen sells the same active ingredient in Prolia under a different name, Xgeva, for the treatment of bone-related complications due to cancer treatment. Current consensus calls for Xgeva sales of $257 million in 2011 growing to $774 million in 2012, says Karnauskas.

On its Monday night call, Amgen may update investors on plans to seek an expanded approval for Xgeva to prevent the spread of prostate cancer to the bone following the release of positive phase III data in December.

Amgen had about $17 billion in cash at the end of the September quarter. What to do with that cash has become an increasing focus for investors, with some urging Amgen to implement its first-ever shareholder dividend.

No biotech company currently offers a dividend, mainly because biotechs, like many technology companies, have historically preferred to reinvest their cash in research and development or make acquisitions. Dividends also chafe against the image of biotech as a high-growth sector.

Yet Amgen, despite the optimism around Prolia and Xgeva, isn't a turbo-charged growth stock any longer, yet the company is sitting on a small mountain of cash. Increasingly, investors would like to see at least some of that cash returned to their pocket because they don't necessarily trust management to invest it wisely, says Shoenebaum.

"Amgen is taking the idea of dividend seriously. They realize they need to do it but have not said when," he says.

Consensus estimates for the fourth call call for Amgen to earn $1.11 a share on total revenue of $3.81 billion. The rest of the large-cap biotech group, including Gilead Sciences ( GILD), Celgene ( CELG), Genzyme ( GENZ) and Biogen Idec ( BIIB), report 2011 results in the coming weeks.

Amgen shares closed Friday at $56.97.

--Written by Adam Feuerstein in Boston.

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