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Amgen's Third Quarter 2012 Revenues Increased 10 Percent To $4.3 Billion And Adjusted Earnings Per Share (EPS) Increased 19 Percent To $1.67

Tuesday, October 23, 2012

Amgen's Third Quarter 2012 Revenues Increased 10 Percent To $4.3 Billion And Adjusted Earnings Per Share (EPS) Increased 19 Percent To $1.6716:02 EDT Tuesday, October 23, 20122012 Total Revenues and Adjusted EPS Guidance Ranges Increased to $17.2-$17.3 Billion and $6.50-$6.60 Third Quarter 2012 GAAP EPS Were $1.41THOUSAND OAKS, Calif., Oct. 23, 2012 /PRNewswire/ -- Amgen (NASDAQ: AMGN) today announced financial results for the third quarter of 2012.  Key results for the quarter include:Total revenues increased 10 percent to $4,319 million, with 8 percent product sales growth driven by strong performance across the portfolio. Adjusted EPS grew 19 percent to $1.67 due to 14 percent adjusted operating income growth and lower shares outstanding.  Adjusted net income increased 2 percent to $1,311 million. GAAP EPS were $1.41 compared to $0.50 and GAAP net income was $1,107 million compared to $454 million. The third quarter of 2011 was negatively impacted by a previously disclosed charge for a legal settlement reserve. Free cash flow was approximately $1.6 billion compared to $0.9 billion."We delivered solid growth in revenues and earnings," said Robert A. Bradway, president and CEO at Amgen. "Our marketed products are performing well and we continue to make progress with key pipeline projects." Year-over-Year$Millions, except EPS and percentagesQ3 '12Q3 '11YOY ?Total Revenues$4,319$3,94410%Adjusted Net Income1,3111,2802%Adjusted EPS1.671.4019%GAAP Net Income1,107454144%GAAP EPS$1.41$0.50182%Adjusted EPS, adjusted operating income, adjusted net income, and free cash flow are non-GAAP financial measures.  These adjustments and other items are presented on the attached reconciliations.  Product Sales Performance Total product sales increased 8 percent driven by strong performance across the portfolio. Combined Neulasta® (pegfilgrastim) and NEUPOGEN® (Filgrastim) sales grew 1 percent. Global Neulasta sales increased 4 percent driven by increases in the average net sales price in the U.S. Global NEUPOGEN sales declined 6 percent driven by a decrease in unit demand from loss of share to biosimilars in Europe.Enbrel® (etanercept) sales increased 17 percent driven by increases in the average net sales price and unit demand. Aranesp® (darbepoetin alfa) sales decreased 17 percent due to changes in practice patterns and a favorable change in accounting estimates in the third quarter of 2011.  Sequentially, unit demand was down 3 percent due to a small share loss in the oncology segment. EPOGEN® (epoetin alfa) sales increased 3 percent driven by reductions in customer discounts and a favorable change in accounting estimates, offset largely by a reduction in dose utilization. Growth-phase products: Sensipar®/Mimpara® (cinacalcet), Vectibix® (panitumumab), and Nplate® (romiplostim) increased 17 percent driven by higher unit demand. XGEVA® (denosumab) sales increased 12 percent on a sequential basis, reflecting increased segment share as well as growth in the overall segment. Prolia® (denosumab) sales decreased 8 percent on a sequential basis driven equally from units and unfavorable changes in wholesaler inventories. The decline in units was primarily impacted by seasonality.Product Sales Detail by Product and Geographic Region$Millions, except percentagesQ3 '12Q3 '11YOY ?USROWTOTALTOTALTOTALNeulasta®/ NEUPOGEN®$1,073$282$1,355$1,3351%Neulasta®8242201,0441,0034%NEUPOGEN®24962311332(6%)Enbrel®1,012671,07992517%Aranesp®178319497600(17%)EPOGEN®49104914763%Sensipar® / Mimpara®1727124320618%Vectibix®3058887911%Nplate®5338917718%XGEVA®1713020110297%Prolia®684211051116%Other 046462677%Total product sales$3,248$953$4,201$3,8778%Operating Expense and Tax Rate Analysis, on an Adjusted BasisCost of Sales, excluding the impact of the Puerto Rico excise tax, increased 0.6 points to 14.0 percent driven primarily by product mix, offset partially by manufacturing efficiencies and higher average net sales price. Research & Development (R&D) expenses increased 11 percent in support of our later-stage clinical programs, driven by AMG 145 and romosozumab (AMG 785). Selling, General & Administrative (SG&A) expenses were flat.  ENBREL profit share expenses increased 18 percent to $386 million, offset by favorable changes to the estimated U.S. healthcare reform federal excise fee and foreign exchange rates.$Millions, except percentagesOn an Adjusted BasisQ3 '12Q3 '11YOY ?Cost of Sales$674$59314%% of sales16.0%15.3%0.7 pts% of sales (Excluding PR excise tax)14.0%13.4%0.6 ptsResearch & Development$849$76311%% of sales20.2%19.7%0.5 ptsSelling, General & Administrative$1,110$1,113(0%)% of sales26.4%28.7%(2.3) ptsTOTAL Operating Expenses$2,633$2,4697%pts: percentage pointsTax Rate increased by 5.1 points to 16.0 percent due primarily to higher tax credits associated with the Puerto Rico excise tax in the third quarter of 2011, the expiry of the U.S federal R&D credit at the end of 2011, and the unfavorable tax impact of changes in revenue and expense mix.  As of Sept. 30, 2012, the R&D tax credit had not been extended. On an Adjusted BasisQ3 '12Q3 '11YOY ?Tax Rate16.0%10.9%5.1 ptsTax Rate (Excluding PR excise tax credits)20.2%17.4%2.8 ptspts: percentage pointsCash Flow and Balance Sheet DiscussionThe Company generated $1.6 billion of free cash flow in the quarter versus $0.9 billion in the third quarter of 2011. The increase was primarily driven by higher operating income and lower cash taxes. During the quarter, Amgen repurchased approximately 10 million shares of common stock at a total cost of $797 million and at an average price of $82.18.  This brings the total shares repurchased under its $10 billion authorized stock repurchase program to 131 million at a total cost of $8.4 billion and at an average price of $64.19. During the quarter, the Company raised $2 billion of bonds with a weighted average maturity of 13 years and an effective pre-tax coupon of 3.6 percent.  The funds will be used to retire the Company's $2.5 billion convertible bonds due February 2013.  The Company previously announced that its Board of Directors declared a $0.36 per share dividend for the fourth quarter of 2012. The dividend will be paid on Dec. 7, 2012, to all stockholders of record as of the close of business on Nov. 15, 2012.$Billions, except sharesQ3 '12Q3 '11YOY ?Operating Cash Flow$1.7$1.0$0.8Capital Expenditures0.20.10.1Free Cash Flow1.60.90.7Dividend Paid0.30.30.0Cost of Shares Repurchased0.82.4(1.6)Adjusted Avg. Diluted Shares (millions)783913(130)Cash Balance25.417.77.7Adjusted Debt Outstanding26.514.512.0Stockholders' Equity19.923.6(3.7)Note: Numbers may not add due to rounding2012 GuidanceFor the full year 2012, the Company now expects:Total revenues to be in the range of $17.2 billion to $17.3 billion and adjusted EPS to be in the range of $6.50 to $6.60.The Company continues to expect:Adjusted tax rate to be in the range of 14 percent to 15 percent.  Excluding the Puerto Rico excise tax credits, Amgen still expects the adjusted tax rate for 2012 to be in the range of 19 percent to 20 percent. Capital expenditures to be approximately $700 million.Third Quarter Product and Pipeline Update The Company provided the following information on selected products and clinical programs: Romosozumab (AMG 785): The Company discussed recently presented results from a Phase 2 study for the treatment of postmenopausal osteoporosis.  The Company also announced that the 12 month Phase 2 fracture healing data are expected in the first half of 2013. AMG 145: The Company announced that data for four Phase 2 studies in subjects with high low-density lipoprotein (LDL) cholesterol will be presented at the American Heart Association Scientific Sessions 2012 meeting in November. Brodalumab (AMG 827): The Company stated that it is enrolling three Phase 3 studies in psoriasis. Ganitumab (AMG 479): The Company discussed the previously announced termination for futility of the Phase 3 study in metastatic pancreatic cancer.? Prolia: The Company discussed the FDA approval on Sept. 20 for a new indication to increase bone mass in men with osteoporosis at high risk for fracture. Non-GAAP Financial MeasuresThe Adjusted non-GAAP (U.S. Generally Accepted Accounting Principles) financial measures included above for the third quarters of 2012 and 2011 exclude, for the applicable periods, certain expenses related to acquisitions, cost-savings initiatives, various legal proceedings, non-cash interest expense associated with our convertible notes and certain other adjustments, as applicable. These adjustments and other items are presented on the attached reconciliations.Management has presented its operating results in accordance with GAAP and on an "adjusted" (or non-GAAP) basis for the third quarters of 2012 and 2011. In addition, management has presented its outstanding debt in accordance with GAAP and on an "adjusted" (or non-GAAP) basis as of Sept. 30, 2012 and 2011.  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. About AmgenAmgen discovers, develops, manufactures and delivers innovative human therapeutics. A biotechnology pioneer since 1980, Amgen was one of the first companies to realize the new science's promise by bringing safe, effective medicines from lab to manufacturing plant to patient. Amgen therapeutics have changed the practice of medicine, helping millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease and other serious illnesses. With a deep and broad pipeline of potential new medicines, Amgen remains committed to advancing science to dramatically improve people's lives. To learn more about our pioneering science and vital medicines, visit www.amgen.com.  Follow us on www.twitter.com/amgen. Forward-Looking StatementsThis news release contains forward-looking statements that involve significant risks and uncertainties, including those discussed below and others that can be found in our Form 10-K for the year ended Dec. 31, 2011, and in our periodic reports on Form 10-Q and Form 8-K.  Amgen is providing this information as of the date of this news release and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.  No forward-looking statement can be guaranteed and actual results may differ materially from those we project.  The Company's results may be affected by our ability to successfully market both new and existing products domestically and internationally, clinical and regulatory developments (domestic or foreign) involving current and future products, sales growth of recently launched products, competition from other products (domestic or foreign) and difficulties or delays in manufacturing our products.  In addition, sales of our products are affected by reimbursement policies imposed by third-party payers, including governments, private insurance plans and managed care providers and may be affected by regulatory, clinical and guideline developments and domestic and international trends toward managed care and health care cost containment as well as U.S. legislation affecting pharmaceutical pricing and reimbursement.  Government and others' regulations and reimbursement policies may affect the development, usage and pricing of our products.  Furthermore, our research, testing, pricing, marketing and other operations are subject to extensive regulation by domestic and foreign government regulatory authorities.  We, or others, could identify safety, side effects or manufacturing problems with our products after they are on the market.  Our business may be impacted by government investigations, litigation and product liability claims.  Further, while we routinely obtain patents for our products and technology, the protection offered by our patents and patent applications may be challenged, invalidated or circumvented by our competitors.  We depend on third parties for a significant portion of our manufacturing capacity for the supply of certain of our current and future products and limits on supply may constrain sales of certain of our current products and product candidate development.  In addition, we compete with other companies with respect to some of our marketed products as well as for the discovery and development of new products.  Discovery or identification of new product candidates cannot be guaranteed and movement from concept to product is uncertain; consequently, there can be no guarantee that any particular product candidate will be successful and become a commercial product.  Further, some raw materials, medical devices and component parts for our products are supplied by sole third-party suppliers.  Our business performance could affect or limit the ability of our Board of Directors to declare a dividend or our ability to pay a dividend or repurchase our common stock. Amgen IncCondensed Consolidated Statements of Income - GAAP(In millions, except per share data)(Unaudited)Three months endedNine months endedSeptember 30, September 30, 2012201120122011Revenues:Product sales$    4,201$      3,877$  12,302$    11,388Other revenues11867542221Total revenues4,3193,94412,84411,609Operating expenses:Cost of sales (excludes amortization of certain acquired intangible assets presented below)7056052,0661,771Research and development8807612,4422,316Selling, general and administrative1,1271,1253,4313,278Amortization of certain acquired intangible assets7474221221Other110854195873Total operating expenses2,8963,4198,3558,459Operating income1,4235254,4893,150Interest expense, net271158762415Interest and other income, net11187359364Income before income taxes1,2634544,0863,099Provision for income taxes156-529350Net income$    1,107$         454$    3,557$      2,749Earnings per share:Basic$      1.44$        0.50$      4.57$        2.98Diluted$      1.41$        0.50$      4.51$        2.96Average shares used in calculationof earnings per share:Basic771907779922Diluted783914789930Amgen IncCondensed Consolidated Balance Sheets - GAAP (In millions)(Unaudited)September 30, December 31, 20122011AssetsCurrent assets:Cash, cash equivalents and marketable securities$              25,374$             20,641Trade receivables, net2,6962,896Inventories2,7692,484Other current assets1,7661,572Total current assets32,60527,593Property, plant and equipment, net5,3815,420Intangible assets, net3,6802,584Goodwill12,58911,750Other assets1,1931,524Total assets$              55,448$             48,871Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable and accrued liabilities$                5,909$               5,670Current portion of long-term debt2,45884Total current liabilities8,3675,754Long-term debt24,02021,344Other non-current liabilities3,1592,744Stockholders' equity19,90219,029Total liabilities and stockholders' equity$              55,448$             48,871Shares outstanding768796Amgen Inc.GAAP to "Adjusted" Reconciliations(In millions)(Unaudited)Three months endedNine months endedSeptember 30, September 30, 2012201120122011GAAP cost of sales$        705$        605$     2,066$     1,771Adjustments to cost of sales:Incremental expense resulting from accelerating depreciation and/or accruing losses for facility operating   leases as a result of our transaction with Boehringer Ingelheim involving our Fremont, California   manufacturing facility(21)(10)(42)(54)Acquisition-related expenses(7)-(7)(7)Stock option expense (a)(3)(2)(9)(8)Total adjustments to cost of sales(31)(12)(58)(69)Adjusted cost of sales$        674$        593$     2,008$     1,702GAAP research and development expenses$        880$        761$     2,442$     2,316Adjustments to research and development expenses:Acquisition-related expenses(14)(2)(34)(27)Certain charges pursuant to our continuing efforts to improve cost efficiencies in our operations(12)-(12)-Reversal of previously accrued expenses for bonuses and stock-based compensation awards,  which were forfeited as a result of the employees' termination pursuant to our continuing efforts  to improve cost efficiencies in our operations-12-12Stock option expense (a)(5)(8)(17)(27)Total adjustments to research and development expenses(31)2(63)(42)Adjusted research and development expenses$        849$        763$     2,379$     2,274GAAP selling, general and administrative expenses$     1,127$     1,125$     3,431$     3,278Adjustments to selling, general and administrative expenses:Acquisition-related expenses(11)(3)(45)(11)Stock option expense (a)(6)(9)(20)(32)Total adjustments to selling, general and administrative expenses(17)(12)(65)(43)Adjusted selling, general and administrative expenses$     1,110$     1,113$     3,366$     3,235GAAP operating expenses$     2,896$     3,419$     8,355$     8,459Adjustments to operating expenses:Adjustments to cost of sales(31)(12)(58)(69)Adjustments to research and development expenses(31)2(63)(42)Adjustments to selling, general and administrative expenses(17)(12)(65)(43)Non-cash amortization of product technology rights acquired in a prior year business combination(74)(74)(221)(221)Certain charges pursuant to our continuing efforts to improve cost efficiencies in our operations(36)(68)(106)(79)Write-off of a non-key contract asset acquired in a business combination(19)-(19)-Expense resulting from changes in the estimated fair values of the contingent consideration   obligations related to a prior year business combination(2)(6)(5)(9)Expenses related to various legal proceedings(53)(780)(65)(785)Total adjustments to operating expenses(263)(950)(602)(1,248)Adjusted operating expenses$     2,633$     2,469$     7,753$     7,211GAAP operating income$     1,423$        525$     4,489$     3,150Adjustments to operating expenses2639506021,248Adjusted operating income$     1,686$     1,475$     5,091$     4,398GAAP income before income taxes$     1,263$        454$     4,086$     3,099Adjustments to income before  income taxes:Adjustments to operating expenses2639506021,248Non-cash interest expense associated with our convertible notes3533104109Total adjustments to income before income taxes2989837061,357Adjusted income before income taxes$     1,561$     1,437$     4,792$     4,456GAAP provision for income taxes$        156$            -$        529$        350Adjustments to provision for  income taxes:Income tax effect of the above adjustments (b)94150232275Income tax benefit related to certain prior period charges excluded from "Adjusted" earnings-7-12Total adjustments to provision for income taxes94157232287Adjusted provision for income taxes$        250$        157$        761$        637GAAP net income$     1,107$        454$     3,557$     2,749Adjustments to income before income taxes, net of the tax effect of the above adjustments2048334741,082Income tax benefit related to certain prior period charges excluded from "Adjusted" earnings-(7)-(12)Adjusted net income$     1,311$     1,280$     4,031$     3,819  Amgen IncGAAP to "Adjusted" Reconciliations(In millions, except per share data)(Unaudited)The following table presents the computations for GAAP and "Adjusted" diluted EPS, computed under the treasury stock method"Adjusted" EPS presented below excludes stock option expense:Three months endedThree months endedSeptember 30, 2012September 30, 2011GAAP"Adjusted"  GAAP"Adjusted"  Income (Numerator):Net income for basic and diluted EPS$  1,107$   1,311$    454$   1,280Shares (Denominator):Weighted-average shares for basic EPS771771907907Effect of dilutive securities1212(*)76(*)Weighted-average shares for diluted EPS783783914913Diluted EPS$   1.41$     1.67$   0.50$     1.40Nine months endedNine months endedSeptember 30, 2012September 30, 2011GAAP"Adjusted" GAAP"Adjusted" Income (Numerator):Net income for basic and diluted EPS$ 3,557$   4,031$ 2,749$ 3,819Shares (Denominator):Weighted-average shares for basic EPS779779922922Effect of dilutive securities1010(*)87(*)Weighted-average shares for diluted EPS789789930929Diluted earnings per share$   4.51$   5.11$   2.96$   4.11(*)   Dilutive securities used to compute "Adjusted" diluted EPS for the three and nine months ended September 30, 2012 and 2011 were computed under the treasury stock method assuming that we do not expense stock options.(a)For the three and nine months ended September 30, 2012 and 2011, the total pre-tax expense for employee stock options was $14 million and $46 million, respectively and $19 million and $67 million, respectively"Adjusted" diluted EPS including the impact of stock option expense for the three and nine months ended September 30, 2012 and 2011 was as follows: Three months endedNine months endedSeptember 30, September 30, 2012201120122011"Adjusted" diluted EPS, excluding stock option expense$   1.67$   1.40$   5.11$   4.11Impact of stock option expense (net of tax)(0.01)(0.01)(0.04)(0.05)"Adjusted" diluted EPS, including stock option expense$   1.66$   1.39$   5.07$   4.06(b)The tax effect of the adjustments between our GAAP and "Adjusted" results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s).  Generally, this results in a tax impact at the U.S. marginal tax rate for certain adjustments, including amortization of intangible assets and non-cash interest expense associated with our convertible notes, whereas the tax impact of other adjustments, including stock option expense, depends on whether the amounts are deductible in the tax jurisdictions where the expenses are incurred or the asset is located and the applicable tax rate(s) in those jurisdictions. Due to these factors, the effective tax rates for the adjustments to our GAAP income before income taxes, for the three and nine months ended September 30, 2012 and 2011 were 31.5% and 32.9% and 15.3% and 20.3%, respectively Amgen IncReconciliation of GAAP Debt Outstanding to "Adjusted" Debt Outstanding(In millions)(Unaudited)GAAPAdjustments for accounting standard (a)"Adjusted"September 30, 2011$      14,265$             188$      14,453September 30, 2012$      26,478$               48$      26,526(a)To exclude the impact of bifurcating the debt and equity components of our convertible notes as required by U.S. accounting standards for these securities commencing in 2009 Reconciliation of Free Cash Flow(In millions)(Unaudited)Three months endedSeptember 30, 20122011Cash Flows from Operations$               1,723$                969Capital Expenditures(173)(120)Free Cash Flow$               1,550$                849 Amgen IncReconciliation of GAAP EPS Guidance to "Adjusted" EPS Guidance for the Year Ending December 31, 2012(Unaudited)2012GAAP EPS (diluted) guidance$  5.79-$  5.89Known adjustments to arrive at "Adjusted" earnings*:Amortization of certain acquired intangible assets(a)0.24Charges associated with cost savings initiatives(b)0.13Acquisition-related expenses(c)0.12Non-cash interest expense associated with our convertible notes(d)0.11Stock option expense(e)0.05Legal settlements(f)0.06"Adjusted" EPS (diluted) guidance$  6.50-$  6.60*The known adjustments are presented net of their related aggregate tax impact of approximately $0.36 per share. (a)To exclude the non-cash amortization of product technology rights acquired in a prior year business combination(b)To exclude certain charges pursuant to our continuing efforts to improve cost efficiencies in our operations(c)To exclude acquisition-related expenses(d)To exclude the non-cash interest expense associated with our convertible notes(e)To exclude stock option expense(f)To exclude the expenses related to various legal proceedingsReconciliation of GAAP Tax Rate Guidance to "Adjusted" Tax Rate Guidance for the Year Ending December 31, 2012(Unaudited)2012 with PR excise tax2012 without PR excise taxGAAP tax rate guidance10.7%-11.9%16.7%-17.9%Tax rate effect of known adjustments discussed above3.3%-3.1%2.3%-2.1%"Adjusted" tax rate guidance14.0%-15.0%19.0%-20.0%CONTACT:  Amgen, Thousand OaksChristine Regan, 805-447-5476 (media)Arvind Sood, 805-447-1060 (investors)(Logo: http://photos.prnewswire.com/prnh/20081015/AMGENLOGO)SOURCE Amgen