Amgen posted mixed third-quarter results Monday. Though the firm’s top line and bottom line increased by 3% each, Amgen’s performance was bolstered by a lower tax rate and reduced shares outstanding (lower earnings quality growth), while being muddied by a large legal charge. Nonetheless, we are maintaining our $80+ fair value estimate, as we think our long-term projections remain in the ballpark.
The firm’s top line expansion was led by a 9% increase in international product sales. Combined Neulasta and Neupogene sales jumped 6%, while US sales of Xgeva, the firm’s new cancer drug, reached $100 million in the quarter following its recent launch. Sales of Sensipar/Mimpara jumped 18%, sales of Vectibix jumped 13%, and sales of Nplate increased 28%. As for weakness, Epogene was the firm’s biggest loser, with sales dropping 27% due primarily to a reduction in unit demand. The firm improved gross margins, but higher R&D and selling and marketing expense limited earnings expansion. Amgen also settled civil and criminal allegations relating to its selling practices and recorded a $780 million charge in the period, which should put some uncertainty behind the firm.
Amgen raised its 2011 guidance for total revenue and adjusted EPS to $15.6 billion (was $15.5 billion) and $5.30 (was $5.20), respectively, on the high end of its provided ranges. The firm continues to support late stage clinical programs including AMG 386 in ovarian cancer, ganitumab (AMG 479) in pancreatic cancer, talimogene laherparepvec—the firm’s oncolytic virus therapy–and AMG 145 through research and development expenses, and we continue to monitor developments on this front. Amgen also spoke highly of rilotumumab (AMG 102) in gastric cancer on its conference call, though the antibody remains in Phase II studies. Finally, the firm announced that its share repurchase program now totals $10 billion, something we’re in favor of given Amgen’s stock undervaluation.