Amgen reports $3,816 million for 2010 third quarter revenue

AmgenOct 26 2010

Adjusted net income decreased 14 percent to $1,313 million for the third quarter of 2010 compared to $1,518 million for the third quarter of 2009.  The decrease in adjusted net income was driven by unusually low research and development (R&D) costs and favorable tax settlements in the third quarter of 2009.  Adjusted earnings per share (EPS) were $1.36 for the third quarter of 2010, a decrease of 9 percent compared to $1.49 for the third quarter of 2009.  

“We are pleased with our progress this year and look forward to resuming growth,” said Kevin Sharer, chairman and chief executive officer.

Adjusted EPS and adjusted net income for the third quarter of 2010 and 2009 exclude, for the applicable periods, stock option expense, certain expenses related to acquisitions, non-cash interest expense resulting from a change in accounting for our convertible notes, the income tax benefit (expense) as a result of resolving certain non-routine transfer pricing issues with tax authorities, and certain other items. These adjustments and other items are presented on the attached reconciliation tables.

On a reported basis and calculated in accordance with United States (U.S.) Generally Accepted Accounting Principles (GAAP), Amgen’s GAAP diluted EPS were $1.28 for the third quarter of 2010, reflecting a decrease of 6 percent from the third quarter of 2009.  GAAP net income decreased 11 percent to $1,236 million for the third quarter of 2010 from $1,386 million for the third quarter of 2009.  

Product Sales Performance

Total product sales for the third quarter of 2010 increased 1 percent to $3,759 million from $3,736 million for the third quarter of 2009.  Sales in the U.S. were $2,921 million in the third quarter of 2010 versus $2,918 million for the third quarter of 2009.  Third quarter 2010 U.S. product sales included a $64 million unfavorable impact due to U.S. Health Care Reform.  International sales increased 2 percent to $838 million versus $818 million for the third quarter of 2009.  Changes in foreign exchange negatively impacted third quarter 2010 sales by $16 million.  Excluding the unfavorable impact of foreign exchange, international product sales increased 4 percent.  

Worldwide sales of Aranesp® (darbepoetin alfa) decreased 9 percent to $623 million in the third quarter of 2010 versus $685 million for the third quarter of 2009.  In the U.S., Aranesp sales decreased 15 percent to $283 million for the third quarter of 2010 versus $333 million for the third quarter of 2009. The decrease was principally due to a low double-digit percentage point decline in unit demand reflecting an overall decline in the segment, slightly offset by an increase in the average net sales price, and unfavorable changes in wholesaler inventories.  International Aranesp sales decreased 3 percent to $340 million versus $352 million in the third quarter of 2009 due to the unfavorable impact of foreign exchange and a decrease in demand, reflecting an overall decline in the segment.  Excluding the unfavorable impact of foreign exchange of $7 million, worldwide Aranesp sales decreased 8 percent and international product sales decreased 1 percent.

Sales of EPOGEN® (Epoetin alfa) decreased 2 percent to $653 million in the third quarter of 2010 versus $663 million in the third quarter of 2009 primarily due to a low single-digit percentage point decline in both unit demand and the average net sales price, partially offset by favorable changes in wholesaler inventory.  The decrease in unit demand reflects a decrease in dose utilization, partially offset by patient population growth.

Combined worldwide sales of Neulasta® (pegfilgrastim) and NEUPOGEN® (Filgrastim) increased 4 percent to $1,254 million in the third quarter of 2010 versus $1,210 million for the third quarter of 2009.  Combined sales of Neulasta and NEUPOGEN in the U.S. were $942 million in the third quarter of 2010 versus $897 million in the third quarter of 2009, an increase of 5 percent due primarily to an increase in the average net sales price.  Combined international sales were $312 million in the third quarter of 2010 versus $313 million for the third quarter of 2009.  Excluding the $6 million unfavorable impact of foreign exchange, international product sales increased 2 percent, reflecting continued conversion from NEUPOGEN to Neulasta.  

Sales of Enbrel® (etanercept) decreased 1 percent in the third quarter of 2010 to $914 million versus $924 million for the third quarter of 2009 due to share declines primarily in dermatology, partially offset by a slight increase in the average net sales price. ENBREL continues to maintain a leading position in both the rheumatology and dermatology segments.

Worldwide sales of Sensipar® (cinacalcet) increased 6 percent to $175 million in the third quarter of 2010 versus $165 million during the third quarter of 2009, primarily as a result of increased international demand.

Vectibix® (panitumumab) sales increased 21 percent to $70 million in the third quarter of 2010 versus $58 million for the third quarter of 2009 driven by an increase in demand in the U.S. and internationally.

Nplate® (romiplostim) sales increased 94 percent to $60 million in the third quarter of 2010 versus $31 million for the third quarter of 2009 driven by an increase in demand in the U.S. and internationally.

Prolia™ (denosumab) sales for the quarter were $10 million, reflecting steady progress with physicians, patients and payers in the U.S. and internationally.

Operating Expense Analysis on an Adjusted Basis:

The adjusted tax rate for the third quarter of 2010 was 19.1 percent compared to 12.9 percent for the third quarter of 2009.  The increase was primarily due to the 2009 favorable impact of settling federal and state income tax audits, as well as the benefit of the federal R&D credit in third quarter of 2009.

During the third quarter of 2010, the Company repurchased approximately 6.6 million shares of common stock at a total cost of $0.4 billion.  The Company currently has $3.3 billion remaining under its authorized stock repurchase program.

Average diluted shares for adjusted EPS for the third quarter of 2010 were 962 million versus 1,021 million for the third quarter of 2009.

Capital expenditures for the third quarter of 2010 were $127 million versus $130 million for the third quarter of 2009.  Worldwide cash and marketable securities were $17.0 billion and adjusted outstanding debt was $13.7 billion as of Sept. 30, 2010.  The Company’s adjusted outstanding debt excludes the impact of a change in accounting on the carrying values of its convertible notes.  The Company’s outstanding debt presented in accordance with GAAP was $13.3 billion as of Sept. 30, 2010.

2010 Guidance Update

The Company reaffirmed both revenue and adjusted EPS guidance at slightly below $15.1 billion and towards lower end of $5.05 to $5.25, respectively.

Included in the 2010 revenue and Adjusted EPS guidance noted above is the estimated impact of the U.S. Health Care Reform Legislation of slightly below $200 million.  

The Company now expects the 2010 adjusted tax rate to be around 20 percent and continues to expect capital expenditures to be approximately $600 million.

Adjusted EPS and the adjusted tax rate exclude stock option expense, certain expenses related to prior acquisitions, the non-cash interest expense resulting from a change in accounting for our convertible notes, and the income tax benefit as a result of resolving certain non-routine transfer pricing issues with tax authorities.

Third Quarter Product and Pipeline Update

The Company provided updates on selected products and clinical programs.

Aranesp:  The Company discussed the U.S. Food and Drug Administration’s (FDA) Cardiovascular and Renal Drugs Advisory Committee (CRDAC) panel meeting which took place on Oct. 18, 2010.  The purpose of the panel was to review the results from TREAT (the Trial to Reduce Cardiovascular Events with Aranesp® Therapy), conducted in patients not on dialysis, and how those results inform the appropriate use of erythropoiesis-stimulating agents (ESAs) in patients with chronic kidney disease (CKD).  The Company will continue to work with the FDA to develop information that will optimize the use of ESAs in CKD patients.

Denosumab:  The Company reaffirmed that the Prescription Drug User Fee Act (PDUFA) action date for its application for denosumab for the treatment of bone metastases to reduce skeletal related events in patients with cancer is Thursday, Nov. 18, 2010.  The FDA granted priority review designation to denosumab for this indication. Priority review designation is granted to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists.

The Company reaffirmed that data from study ‘147 for denosumab in the prevention of prostate cancer bone metastases is expected to be available in the fourth quarter of 2010.  

Vectibix:  The Company announced that it plans to file supplemental Biologics License Applications for first- and second-line metastatic colorectal cancer indications in the U.S. during the fourth quarter of 2010.

Non-GAAP Financial Measures

Management has presented its operating results in accordance with GAAP and on an “adjusted” (or non-GAAP basis) for the three and nine months ended Sept. 30, 2010 and 2009. In addition, management has presented its outstanding debt in accordance with GAAP and on an “adjusted” (or non-GAAP basis) as of Sept. 30, 2010.  The Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors.  The Company uses these non-GAAP financial measures in connection with its own budgeting and financial planning.  These non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in conformity with GAAP. Further, our reconciliations of GAAP to "adjusted" operating results, which are included on the attached tables, are presented in a format which we believe facilitates a reader's understanding of the impact of the various adjustments to our GAAP operating results, individually and in the aggregate, and are not intended to place any undue prominence on our adjusted operating results.