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Amgen (AMGN) Counts on New Drugs Amid Rising Biosimilar Woes


Amgen, Inc. AMGN has done relatively well in 2018 so far, coming up with strong quarterly results and positive pipeline and regulatory updates.

Strong Third-Quarter Results

Last month, Amgen reported impressive third-quarter 2018 results. It beat estimates for both earnings and sales and also increased its guidance for the year.

Third-quarter 2018 earnings of $3.69 per share beat the Zacks Consensus Estimate of $3.42. Earnings increased 13% year over year driven mainly by lower tax rate and share repurchases. Total revenues of $5.90 billion in the quarter surpassed the Zacks Consensus Estimate of $5.80 billion and increased 2% year over year.

Total product revenues increased 1% from the year-ago quarter as increasing demand for newer products like Prolia, Kyprolis, Xgeva, Blincyto and Parsabiv was partially offset by lower sales of mature brands like Enbrel, Aranesp, Epogen, Neulasta and Neupogen due to competitive pressure.

Amgen raised its sales and earnings guidance for 2018 driven by a better-than-expected performance in the third quarter and an optimistic guidance for the fourth quarter. The company now expects revenues in the range of $23.2-$23.5 billion compared with the previous prediction of $22.5-$23.2 billion. The high end of the guidance assumes that no Sensipar generics are launched this year.

Pipeline & Regulatory Successes

This year, Amgen made rapid progress with its pipeline and line extensions.

Aimovig/erenumab for prevention of migraine was approved and launched in the United States in the second quarter of 2018. Aimovig was the first FDA-approved treatment, specifically developed to treat migraine by blocking calcitonin gene-related peptide (CGRP). Aimovig was approved in the EU in July. Amgen has developed Aimovig in partnership with Novartis NVS.

On the third-quarter conference call, the company said that Aimovig is off to a strong start and 100,000 patients have started treatment with Aimovig since launch through 12,000 different prescribers. Regarding competitive pressure from Teva’s TEVA and Lilly’s LLY CGRPs, which were also approved this year, management sounded confident in its ability to compete with Aimovig's differentiated product profile.

Amgen also gained approval for several line extensions this year. Prolia and Xgeva were approved for new indications, glucocorticoid-induced osteoporosis and prevention of SRE in multiple myeloma patients, respectively, in the United States and EU. Blincyto was approved in the United States for a new indication, minimal residual disease (MRD)-positive B-cell precursor acute lymphoblastic leukemia (“ALL”).

The line extensions expanded the eligible patient populations of these drugs and will drive their sales higher in future quarters. Also, in 2017/early 2018, Amgen gained regulatory approvals to include overall survival data from key studies on the labels of Kyprolis and Blincyto, which added to sales of these products.

Biosimilars: A Long-Term Growth Driver

Amgen has also delivered on its biosimilars pipeline so far this year, which represents significant growth opportunity. Two of its biosimilars, Kanjinti (a biosimilar of Roche’s cancer drug Herceptin) and Amjevita (biosimilar of Abbvie’s blockbuster RA drug, Humira) were launched in EU this year and can contribute to sales in the future quarters. Amgen has eight biosimilars in its pipeline, which could be an important long-term growth driver for the company

Challenges in Store

Amgen faces challenges related to its more mature products such as launch of competing biosimilar versions of Neulasta and Epogen, further sales erosion of Neupogen and Aranesp and increasing competitive pressures on Enbrel.

Novartis’ generic arm Sandoz and Teva are already marketing biosimilar versions of Neupogen in the United States, which are hurting Neupogen’s sales. Mylan’s biosimilar version of Neulasta, Fulphila, which is priced at a discount of 33% to Neulasta’s list price, was launched in the United States in July and hurt sales of Neulasta in the third quarter of 2018.

More biosimilars are expected to be launched by the end of next year, which will put further pressure on Neulasta sales. Pfizer’s Retacrit, the first biosimilar version of Epogen, was approved in May 2018 and may be launched soon. Sensipar lost patent exclusivity in March 2018 and generics may to be launched (at-risk) this year.

The softness in sales of Enbrel, Amgen’s largest product, is also a cause for concern. Pricing pressure and stiff competition are hurting sales of Enbrel, one of the main drivers of Amgen’s revenues.

Meanwhile, uptake of key new drug, Repatha has been slow due to payer restrictions. On the third quarter conference call, the company said that despite its efforts to improve patient access to Repatha, patients still face significant hurdles due to high co-pay expenses. In October, Amgen announced its decision to cut the U.S. list price of Repatha by 60% to improve access and affordability of Repatha. Though the lower price may benefit Repatha volumes sales in the near term, sales from the drug will be lower due to the price cut.

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