Changing of the Guard Heralds Amgen's Q1 Results

US biotech firm Amgen has undergone a major week of transition as chief executive officer Kevin Sharer drew a close to his tenure at the company's first-quarter results presentation. The company simultaneously announced the acquisition of the Turkish generics firm Mustafa Nevzat (MN) Pharmaceuticals, which represents the first of its kind on two fronts for the normally M&A gun-shy Amgen: an acquisition in a strategically important emerging market, and the acquisition of a pure play generics firm (see Turkey: 25 April 2012: Amgen Spreads Its Wings Through Turkey Generics Acquisition). It represents an important transition for the company, from a strategically focused biotech company, with a structure that was built on the foundation of a dialysis one-stop shop, into a more globalised, typical biopharmaceutical company with more diversified pharmaceutical interests.

At the company's first-quarter results presentation, it presented revenues growth of 9% year-on-year (y/y) to USD4.0 billion. Adjusted net income increased 2% to USD1.2 billion; generally accepted accounting principles (GAAP) net income increased by 5% to USD1.2 billion. GAAP operating income increased to USD1.5 billion compared to USD1.3 billion in 2011.

On the product front, the Xgeva/Prolia franchise is driving growth, notwithstanding yesterday's (26 April) announcement that the FDA is asking for another trial in the prevention of bone metastasis setting. Xgeva has been launched in key markets such as Germany and Australia, which have driven growth, although the potential launch of generic Zometa (zoledronic acid) remains a key headwind. The commercial profile of drugs such as Epogen and Aranesp, which essentially created the Amgen that we know, are declining amid product maturity, increased competition, regulatory setbacks and bundling pressures. Today also sees the launch of a significant new competitor here in the shape of Affymax (US)/Takeda (Japan)'s Omontys (peginesatide). Enbrel, meanwhile, continues to be a strong growth driver in the rheumatoid arthritis market.

Outlook and Implications

Amgen's immediate guidance remains unchanged, with total revenues in the range of USD16.1–16.5 billion and capital expenditures of USD700 million. Its fortunes will be dictated by continued uptake on Xgeva/Prolia, particularly if the company can overturn some of the reimbursement setbacks in Europe. IHS Global Insight also expects key Phase III results for T-VEC (talimogene laherparepvec) in 2012, and clinical results for anti-PCSK9 antibody AMG-145 in hypercholesterolaemia could also provide significant potential upside. Meanwhile, on top of its acquisition in Turkey, the firm is also looking for inorganic expansion in Brazil, Russia, China, South Korea, Mexico and Japan—the latter of which remains a glaring gap in Amgen's global infrastructure.