Amgen (AMGN) to Report Q1 Earnings: What's in the Cards?

Amgen Inc. AMGN will report first-quarter 2019 results on Apr 30, after market close. Amgen delivered positive earnings surprise of 4.91% in the last reported quarter.

Amgen shares have declined 9.4% this year so far against 2.3% increase registered by the industry during this period.

 

 

Amgen’s performance has been impressive, with the company delivering a positive surprise in each of the trailing four quarters with the average being 7.26%.

Amgen Inc. Price and EPS Surprise

 

Amgen Inc. Price and EPS Surprise | Amgen Inc. Quote

Let’s see how things are shaping up for the company this quarter.

 

Factors at Play

Higher sales of newer products like Prolia, Xgeva, Kyprolis and Blincyto should make up for uncertainty surrounding timing and intensity of generic competition for Sensipar and biosimilar competition for Neulasta; continued competitive dynamics for Enbrel; and new competition against Aranesp and Neulasta in the first quarter. Also, recently launched products including Aimovig, Repatha and biosimilars and international expansion are expected to drive growth.

High demand and share gains in both the United States and international markets should drive sales of Prolia.

In 2018, Xgeva gained approval in both the United States and EU for the prevention of skeletal-related events in patients with multiple myeloma, which drove the drug’s volumes in the fourth quarter. An expanded patient population for the drug is expected to drive Xgeva volumes in the first quarter as well.

Kyprolis sales should continue to be driven by increased demand and robust uptake in outside U.S. markets.

The Zacks Consensus Estimate for Prolia, Xgeva and Kyprolis sales is $596 million, $467 million and $248 million, respectively.

Sales of Amgen’s PCSK9 inhibitor, Repatha have suffered since launch due to payer restrictions. Despite Amgen’s efforts to improve access to Repatha, patients face significant hurdles due to high co-pay expenses. In response, Amgen announced a cut in the U.S. list price of Repatha by 60% to improve access and affordability of Repatha. The lower price may impact Repatha sales in the first quarter though management sounded optimistic about seeing better volume trends. The Zacks Consensus Estimate for Repatha sales stands at $183 million.

Sales of Amgen’s secondary hyperparathyroidism treatment, Parsabiv are expected to increase in the first quarter. The Zacks Consensus Estimate for Parsabiv sales is pegged at $147 million.

However, Amgen’s mature drugs like Enbrel, Aranesp, Epogen, Neupogen and Neulasta are facing an array of branded and generic competitors. Several generic versions of Neupogen launched in the United States continue to hurt Neupogen’s sales. Two companies, Mylan and Coherus launched biosimilars of Neulasta in the United States in mid 2018/early while three long-acting biosimilar competitors were launched in the EU. This led to a sharp decline in sales of Neulasta in the second half of 2018 with the negative trend expected to continue in the first quarter. Also, increased competition from PD-1s and other new cancer therapies hurt demand for the class of medicines to which Neulasta belongs.

Pfizer’s PFE Retacrit, the first biosimilar version of Amgen’s ESA Epogen, was launched in November 2018. Biosimilar competition coupled with Amgen’s contractual pricing commitments with DaVita is expected to hurt Epogen’s price significantly through 2019.

Sensipar lost patent exclusivity last year and generics may be launched (at-risk) soon. On the fourth-quarter conference call, management had warned that Sensipar sales in 2019 could be lower than last year due to the brief generic entry by Teva TEVA, conversion from Medicare Part D to B and continued adoption of Parsabiv.

Investor focus on the first-quarter call will be on management’s comments on the sales uptake of its new migraine drug, Aimovig. On the fourth-quarter call, the company had said that Aimovig’s launch had been strong. Aimovig/erenumab for prevention of migraine was approved and launched in the United States and EU in mid-2018.

Another important drug, Evenity, was approved by the FDA in April this year and in Japan in January for treating osteoporosis in postmenopausal women at high risk of fracture. Investors may expect an update on the commercial plans for this drug on the call.

Operating costs in 2019 are expected to be flat to down from 2018 on an absolute basis, which, to an extent, should benefit first-quarter margins.

Earnings Whispers

Our proven model does not conclusively show that Amgen is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Its Earnings ESP is +0.03%. The Zacks Consensus Estimate is pegged at $3.45 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Amgen’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

A couple of large biotech/pharma stocks that also have a positive ESP and a favorable Zacks Rank include:

Incyte Corporation INCY with an Earnings ESP of +14.47% and a Zacks Rank #1. The company is slated to release results on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pfizer has an Earnings ESP of +0.65% and a Zacks Rank #3. The company is slated to release results on Apr 30.

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