Analysts Look Past Quarter to Amgen’s Future

While product sales declined in the first quarter for Amgen Inc., executives with the big pharmaceutical company were optimistic about its financial state going forward.

Out of 21 product categories, the Thousand Oaks firm saw sales decreases in 12 of them. Overall, total product sales were down by 5 percent in the first quarter when compared with the prior year and the net selling price declined by 7 percent year over year.In a conference call last month with analysts to discuss first quarter results, Amgen Chief Executive Robert Bradway said that the company was experiencing a mirror image to the circumstances it had last year when it came strong out of the gate in January and February and then began to feel the impact of the coronavirus pandemic in March.“This year, especially in the U.S., it was almost the reverse. We felt the impact of the pandemic in January and February, and we began to see a recovery in March, a trend that seems to be holding in April as well,” Bradway said. “Setting aside the pandemic, we executed effectively in the first quarter.”The company reported on April 27 an adjusted net income of $2.2 billion ($3.70 a share) for the quarter ending March 31, compared with an adjusted net income of $2.5 billion ($4.22) in the same period a year earlier. Revenue fell by 4 percent to $5.9 billion.Upbeat receptionAnalysts who follow Amgen were upbeat about the company going forward.

Jay Olson, an equity analyst with Oppenheimer & Co. Inc. in New York, wrote in a research note that despite challenges from COVID-19 and net pricing headwinds, Amgen still delivered a 4 percent volume growth in the first quarter and continued its international expansion.“We remain optimistic about 2021 and anticipate continued sales growth from both U.S. and ex-U.S. markets with contributions from potential approvals of sotorasib and tezepelumab,” Olson wrote in the note.Sotorasib, also known as Lumakras, treats patients with a mutated non-small cell lung cancer, while tezepelumab is being tested to treat asthma.Michael Yee, an equity analyst with Jefferies LLC, did not fret over the first quarter numbers falling short of Wall Street expectations. Historically, the first quarter is light for Amgen and the company bounces back in the second quarter, Yee wrote in a research note.

“Our call is it will eventually bounce for early (Lumakras) approval for summer and strong launch, Q2 rebound and guidance raise, then (Lumakras) combos in (the second half of the year),” Yee said in his note.

Amgen executives expect a decision by the U.S. Food and Drug Administration on approval for Lumakras as a second-line cancer treatment in August. Yee, however, expects the FDA will decide before then and that the commercial launch of Lumakras will be strong.

“Consensus is only $100 million plus, but our math … suggests (Lumakras) is four times bigger and should dwarf those sales launches,” Yee put in his note.  Lumakras’ path forwardDana Leone, senior biotech analyst with Raymond James & Associates, focused his research note from April 27 on Lumakras, which he predicted would hit peak sales of $2.2 billion by 2027 just on non-small cell lung cancer alone.

Updates to the ongoing studies for Lumakras continue to focus attention on several key areas for future development, including outcomes from studies of combining Lumakras with other drugs; the pathway forward for front-line (non-small cell lung cancer) approval; and outcomes for other tumor types, such as colorectal cancer.

“Based upon the updates provided by management today, and our recent conversations with the clinical community, there seem to be some significant emerging questions around the path forward for sotorasib and what may be updated during (the American Society of Clinical Oncology annual meeting in June),” Leone said in his note.

Overall, Amgen sold 4 percent more drugs in the first quarter but the price declined 7 percent from the previous year. The company also attributed the quarterly performance for some of its biggest drugs, including Enbrel, Otezla and Aimovig, to “the historic pattern of lower first-quarter sales relative to the remainder of the year due to the impact of benefit plan changes, insurance reverifications and increased co-pay expenses as U.S. patients work through deductibles.”