Amgen Is a Total Battleground

Back in September, I was optimistic that Amgen (AMGN) had many ways to win. I was looking towards the drug pipeline and not the slowdown in existing therapies. But now Amgen has become a total battleground.

After Amgen reported third-quarter results, the stock dived as sales of Enbrel came in below consensus estimates. Enbrel reported sales of $1.452 billion, flat with last year. Epogen continued to lose market share to Aranesp, as sales fell 31% to $355 million.

Neupogen sales declined 36% to $183 million. Neupogen is facing serious competition from a biosimilar treatment called Zarxio from Sandoz.

Neulasta faces serious competitive threats too. Its sales fell 5% to $1.2 billion.

Total third-quarter revenue was $5.8 billion, up 2%, while total product sales were flat with last year.

Third-quarter earnings of $3.02 per share were 23 cents better than expected. Revenue rose 1.5% to $5.81 billion, vs. the $5.71 billion consensus. And Amgen's expense control is impressive. Non-GAAP operating margins jumped 4.2 points to 52.9%.

Management increased guidance for fiscal 2016. The company sees earnings between $11.10 and $11.40 vs. the previous estimate of $11.35. Revenue is expected to be between $22.6 million and $22.8 billion.

Even though the company raised guidance, revenue is still slowing. In 2014, sales grew 7.4%, but sales are expected to slow to just 3.5% in 2017 and come in virtually flat by 2018.

Legacy products -- Epogen, Aranesp, Neupogen, Neulasta and Sansipar -- could experience a 4% annualized drop in revenue through 2020. Analysts think the company's new products will not generate enough revenue to offset the losses on Amgen's legacy products.

While Amgen has a strong pipeline, it may not be enough to replace the legacy treatments that are losing market share. Investors are waiting for results of a migraine study expected sometime in the fourth quarter. They are also waiting for the company to submit a drug application for ABP-2015, a biosimilar to Avastin. Data from the ARCH trial for romosozumab could also come out in the first half of the New Year.

While I'm cautiously optimistic on Amgen and its pipeline, it's increasingly difficult to hold this stock while the company is making the transition from legacy treatments to potential new ones. The stock has become too much of a battleground. I would to buy the stock lower on the hope investor sentiment turns more positive late next year.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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