Amgen (AMGN) To Report Q4 Earnings: What's In The Cards?

We expect Amgen Inc. (NASDAQ:AMGN) to beat estimates when it reports fourth-quarter and full-year 2018 results on Jan 29, after market close. Amgen delivered positive earnings surprise of 7.89% last quarter.

Amgen shares have risen 0.4% in the past year against 23.9% decrease registered by the industry during this period.

Amgen’s performance has been modest, with the company delivering a positive surprise in three out of the trailing four quarters. The average earnings beat over the last four quarters is 4.80%.

Let’s see how things are shaping up for the company this quarter.

Factors at Play

Amgen’s newer products like Prolia, Kyprolis, Xgeva, Blincyto are expected to perform well backed by higher demand, making up for lower sales of mature brands like Enbrel, Aranesp, Epogen, Neulasta and Neupogen due to competitive pressure.

High demand and share gains in both the United States and international markets should drive sales of Prolia. Though seasonality hurt sales of the product somewhat in the third quarter, it should not have any impact in the fourth quarter.

In 2018, Xgeva gained approval in both United States and EU for the prevention of skeletal-related events in patients with multiple myeloma. The approval for the expanded patient population drove higher volumes of Xgeva in the past two quarters, a trend we expect will continue in the fourth quarter.

In the third quarter, Blincyto was approved in Japan and for the pediatric patient population in the United States. This label expansion may add significantly to sales in the fourth quarter.

Kyprolis sales should continue to be driven by increased demand and robust uptake in outside U.S. markets.

The Zacks Consensus Estimate for sales of Prolia, Xgeva, Blincyto and Kyprolis is pegged at $613 million, $445 million, $61 million and $260 million, respectively.

Sales of Amgen’s PCSK9 inhibitor, Repatha, have suffered since launch due to payer restrictions. On the Q3 call, the company said that despite its efforts to improve access to Repatha, patients still face significant hurdles due to high co-pay expenses. In response, Amgen cut the U.S. list price of Repatha by 60% to improve access and affordability of Repatha. Though lower price may impact Repatha sales in the near term, management is optimistic about better volume growth in the fourth quarter and beyond. The Zacks Consensus Estimate for sales of Repatha is $163 million.

Amgen’s newly launched secondary hyperparathyroidism treatment Parsabiv recorded significantly improved sales in the third quarter. We expect the drug to generate higher sales in the fourth quarter.

However, Amgen’s mature drugs like Enbrel, Aranesp, Epogen, Neupogen and Neulasta are facing an array of branded and generic competitors. Novartis’ (NYSE:NVS) generic arm Sandoz and Teva are marketing biosimilar versions of Neupogen in the United States, thereby 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. This led to a sharp decline in sales of Neulasta in the third quarter with the negative trend expected to continue in the fourth. Pfizer’s Retacrit, the first biosimilar version of Epogen, was launched in November 2018 and may hurt Amgen’s branded drug sales in the fourth quarter.

Investor focus on the call will be on management’s comments on sales uptake of its newly approved migraine drug, Aimovig. Aimovig/erenumab for prevention of migraine was approved and launched in the United States in second quarter of 2018. Aimovig was approved in EU in July. On the Q3 conference call, the company said that Aimovig is off to a strong start. Regarding competitive pressure from Teva’s and Lilly’s CGRPs, which were also approved in 2018, management sounded confident of its ability to compete with Aimovig's differentiated product profile.

On the third quarter call, Amgen warned that operating costs in the fourth quarter are expected to increase in the range of 12%-15% sequentially

Earnings Whispers

Our proven model shows that Amgen is likely to beat estimates this quarter because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($3.27 per share) and the Zacks Consensus Estimate ($3.26 per share), is +0.23%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Amgen has a Zacks Rank #3. The combination of Amgen’s Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.

Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Large biotech stocks that have both a positive ESP and a favorable Zacks Rank include:

Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) has an Earnings ESP of +6.80% and a Zacks Rank of 3. The company is scheduled to report fourth-quarter earnings on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene Corporation (NASDAQ:CELG) has an Earnings ESP of +2.31% and a Zacks Rank #1. The company is slated to release results on Jan 31.

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