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Wall Street fears Amgen’s tough first quarter is just the start

Dive Brief:

  • Drug sales at Amgen were down 5% during the first quarter, results which the company pinned on several factors, including price cuts and the lingering effects of the coronavirus pandemic.

 

  • In an earnings presentation Tuesday, Amgen reported $5.6 billion in sales, down from the $5.9 billion reported over the same three-month period last year. Though a handful of Amgen’s drugs achieved double-digit growth, including the bone loss therapy Prolia and the cholesterol medicine Repatha, overall, more than half of its top-selling products posted year-over-year sales declines.

 

  • Total revenue of $5.9 billion was also below what Wall Street had expected for the quarter. Looking ahead, analysts fear the headwinds facing Amgen won’t let up anytime soon. Geoffrey Porges, an analyst at SVB Leerink, wrote to clients that “there are multiple negative trends in their core business that could persist through most of the year.”

 

Dive Insight:

High-priced biologics are what turned Amgen into one of the world’s largest biotechnology companies. Last year, in spite of the coronavirus pandemic, the California-based drug developer racked up $24 billion in product sales, reflecting a 9% annual increase. Amgen also had seven medicines with blockbuster sales in 2020, including Enbrel, an anti-inflammatory agent, Neulasta, a stimulator of white blood cell growth, and Prolia.

But many of Amgen’s top drugs haven’t been selling as well as they used to. Enbrel sales were down 4% last year, while Neulasta’s fell 29%. And in the most recent quarter, 12 of the company’s 20 biggest drugs saw some level of decline.

Amgen pinned the weaker sales seen this year on pricing and the ongoing pandemic.

On pricing, Amgen said the net selling price for its medicines — which takes into account the discounts and rebates offered to payers — was 7% lower during the first quarter. Enbrel, Repatha and Neulasta were negatively affected by these reductions, as were newer products like the cancer drug Mvasi, the headache medication Aimovig, and the Herceptin biosimilar Kanjinti.

As for the pandemic, the surge of COVID-19 cases early this year in the U.S. and Europe caused patients to miss hospital visits or skip getting treatments. Those trends can be particularly damaging for biologics companies like Amgen, whose products often need to be administered by healthcare providers in established facilities.

Amgen said the effects of the recent COVID-19 surge were most pronounced in January and February, but demand has since improved.

“We remain hopeful that the global vaccination rollout will support a steady recovery going forward,” the company said in a statement. “However, we expect to see continuing disruption from COVID-19 in the second quarter and, to a lesser degree, in the second half of the year.”

Investors appear to be bracing for a potentially tough rest of the year, too, as Amgen shares fell more than 7% in Wednesday morning trading.

“We expected a miss, but goodness gracious,” wrote Christopher Raymond, an analyst at Piper Jaffray, referring to how, for the first time in years, Amgen’s first quarter total revenue and earnings per share were below what analysts had predicted. According to Raymond, the consensus was that total revenue would be $366 million higher, to hit almost $6.3 billion.

While Amgen attributed these misses to multiple factors, some see pricing as the company’s main problem in the months to come.

“The company attributed their results to continued weakness from COVID, but this is hard to reconcile,” wrote Porges from SVB Leerink, who noted that despite the drop in net selling price, Amgen sold 4% more product in this year’s first quarter compared to last year’s. Also, the overall sales decline happened even though Amgen increased the price on most of its marketed medicines about 6% at the start of the year.

“The only explanation, in our view, is that Amgen (like other companies reporting this quarter) had to offer significantly larger rebates to maintain formulary access in increasingly competitive categories,” Porges wrote.

In its earnings release, Amgen said market competition has caused — or is likely to cause — the company to sell certain products at a lower net price or at less volume. Those products include Neulasta, Kanjinti and Mvasi. Otezla, an anti-inflammatory agent that Amgen bought from Celgene for $13 billion, could also face competition from a drug being developed by Bristol Myers Squibb that’s quickly moving toward regulatory review.

According to analysts, these looming challenges put more pressure on Amgen to deliver on a closely watched cancer medicine that it’s been developing for what has long been considered an “undruggable” target.

The experimental medicine, now known as Lumakras, has shown promising effects in lung cancer patients, results which led Amgen to quickly submit it for approval. The Food and Drug Administration should make a decision on approval of Lumakras by Aug. 16, though a verdict could come earlier.