Bloomberg News

Amgen Third-Quarter Profit Beats Estimates on Higher Sales

October 24, 2011

(Updates with Prolia sales in 11th paragraph.)

Oct. 24 (Bloomberg) -- Amgen Inc., the world’s largest biotechnology company, raised its 2011 forecast after reporting third-quarter profit that topped analysts’ estimates on higher sales of cancer drugs.

Net income fell 63 percent to $454 million, or 50 cents a share, after Amgen recorded a $780 million charge for costs associated with a legal settlement, the Thousand Oaks, California-based company said today in a statement. Earnings excluding certain items of $1.40 a share exceeded by 10 cents the average estimate of 22 analysts surveyed by Bloomberg.

“The company beat on top and bottom line, on lower taxes and lower expenses and share buybacks, which is all solid,” said Michael Yee, director of biotechnology equity research of RBC Capital Markets in San Francisco. “Importantly, the company also raised its share buybacks up to $10 billion authorized, which remains a key part of returning shareholder value.”

Revenue increased 3 percent to $3.94 billion in the quarter from a year earlier, even as sales of its former core anemia drugs, Aranesp and Epogen, fell 16 percent to $1.08 billion. That decline was offset by 6 percent gains from Amgen’s Neulasta and Neupogen, which are used to reduce the risk of infection in patients on chemotherapy, to $1.34 billion.

Amgen increased its 2011 revenue forecast to $15.4 billion to $15.6 billion, from $15.1 billion to $15.5 billion. It also projected adjusted earnings per share of $5.15 to $5.30, up from its previous forecast of $5 to $5.20 a share.

The company also increased its share buyback program to $10 billion. As of June 31, the company had $6.4 billion remaining under its repurchase plan.

Legal Settlement Charge

Net income for the quarter was reduced by $705 million, or 77 cents a share, because of a charge the company is taking for a proposed agreement with U.S. prosecutors to settle allegations related to its sales and marketing practices, Amgen said in its statement. The proposed settlement will resolve federal investigations, state Medicaid claims and lawsuits, the company said.

The settlement relates to an investigation that dates back at least four years, when the company said in a November 2007 filing that it received subpoenas from U.S. prosecutors over its marketing practices. Two years later, New York was among 15 states that sued Amgen and drug distributors for what they claimed was a nationwide kickback scheme to boost sales of Aranesp.

Changing Focus

Amgen’s third-quarter profit declined from $1.24 billion, or $1.28 a share, a year earlier. The company is realigning its research and development efforts as it devotes more resources to denosumab, approved last year as Prolia, for women with osteoporosis, and Xgeva, to reduce fractures in cancer patients, as well as medicines further along in clinical trials. As a result, the company said last week it would fire 380 employees in its research and development division.

Sales of Prolia could reach $903.3 million in 2013, according to the average estimate of seven analysts surveyed by Bloomberg. The company said U.S. and international sales rose to $51 million during the third-quarter, from $10 million a year earlier. Xgeva generated $100 million in the U.S.

The company’s shares gained 36 cents to $58.95 at the close of New York trading before the earnings announcement.

--Editors: Angela Zimm, Andrew Pollack

To contact the reporter on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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