Amgen 3Q profit jumps on lower costs, higher sales

TRENTON, N.J. -- Biotech drugmaker Amgen Inc. said Tuesday that its third-quarter profit more than doubled from a year ago, when a huge legal-reserve charge weighed down results. It trounced Wall Street expectations and raised its profit forecast sharply.

The maker of anemia drugs Aranesp and Epogen said net income was $1.11 billion, or $1.41 per share. That's up from $454 million, or 50 cents a share, in 2011's third quarter.

Last year's results included a charge of $780 million, or 77 cents per share after taxes, for legal reserves to cover a proposed settlement of government and whistleblower investigations into the company's marketing practices, including alleged kickbacks.

Amgen said its net income adjusted to exclude one-time items was $1.31 billion, or $1.67 per share, up from $1.28 billion, or $1.40 per share. Analysts expected adjusted net income of $1.48 a share in the most-recent quarter, according to FactSet.

"It was a good quarter," said Edward Jones analyst Judson Clark. He noted, however, that the big jump in Amgen's adjusted earnings per share was mainly due to its ongoing stock-buyback program.

Chief Financial Officer Jonathan Peacock said Amgen has bought back 131 million shares, worth about $8.4 billion since it authorized a $10 billion share-repurchase program about a year ago. Meanwhile, Amgen's share price has jumped almost $30, or 50 percent, in the past 12 months.

Revenue totaled $4.32 billion, up 10 percent from $3.94 billion and above estimates of $4.24 billion.

Product sales increased 8 percent. Sales were driven by Enbrel for immune disorders, up 17 percent to $1.08 billion, along with big jumps for most of the company's newest drugs, including Prolia for osteoporosis and Xgeva, a different dose of the same active ingredient that's for preventing fractures in cancerous bones.

But sales rose only 1 percent, to a total of $1.4 billion, for the company's biggest franchise, Neulasta and Neupogen, for fighting infection in cancer patients, and Aranesp sales were down 17 percent to $497 million.

Analyst Steve Brozak of WBB Securities said he's concerned Amgen depends so much on Enbrel, which is in an "exceedingly competitive" market. The drug provides about 25 percent of Amgen's total revenue and one-third of its sales in the U.S., where he expects insurers to start pushing back against the high prices of biologic drugs.

Enbrel and rival medicines such as Remicade and Simponi work by tamping down the immune system to control disorders including rheumatoid arthritis and plaque psoriasis. But they leave people open to infections and possibly unforeseen consequences after long-term use, Brozak said.

Sean Harper, Amgen's research head, noted osteoporosis drug Prolia has been approved for use in men, and the company will be presenting mid-stage testing data next month on AMG 145, a cholesterol drug.

The company also expects new mid-stage data on fracture-healing rates after a year of use in patients taking its experimental osteoporosis drug, AMG 785, and has now enrolled patients in three late-stage tests of psoriasis drug brodalumab. But a late-stage study of ganitumab, for advanced pancreatic cancer, was stopped because the drug wasn't working.

The Thousand Oaks, Calif., company raised its 2012 profit forecast to a range of $6.50 to $6.60 per share, excluding one-time items, up from $6.20 to $6.35. It also said it expects sales for the year to total $17.2 billion to $17.3 billion, up from its July forecast of $16.9 billion and $17.2 billion.

Analysts are expecting $6.33 a share on $17.02 billion in revenue.

Clark noted that the per-share increase was not much more than the amount by which Amgen beat analysts' expectations in the third quarter, indicating the company thinks fourth-quarter results "won't necessarily blow anybody's socks off." He said that likely explained investors' relatively muted reaction in after-hours trading of Amgen shares.

They rose $2.08, or 2.4 percent, to $89.40 in extended trading.