Amgen warns of 2019 revenue drop, pressuring stock
- While Amgen largely met Wall Street's expectations for 2018, the biotech tempered hopes for revenue growth this year, conservatively predicting a year-over-year sales decline between 3% and 8%, company executives said Tuesday.
- Older products like Amgen's top-selling drug Enbrel made up about two-thirds of total product sales last year. Competitive threats and pricing pressures led the biotech to forecast 2019 revenues of between $21.8 billion and $22.9 billion, a range noticeably below 2018's total of $23.7 billion.
- Investors reacted negatively, sending shares in Amgen down by as much as 6% on Wednesday in late morning trading following Tuesday's after-market report.
Amgen has a track record for conservative guidance. Still the biotech's numbers would have 2019 revenues coming in below last year even at the high end of the company's forecast. Biosimilar competition and pricing concerns appear to largely drive that cautiousness.
Several of the Thousands Oaks, California-biotech's top drugs face cheaper rivals this year. Neulasta (pegfilgrastim) now competes in the U.S. with two biosimilars from Mylan and Coherus BioSciences. Sensipar (cinacalcet) may take a generic hit in mid-2019 depending on how an appeals court rules.
A decision in a patent trial over Enbrel (etanercept) is also expected by the company in the next couple months, although Amgen execs reiterated belief in the intellectual property defending Enbrel from copycats.
On pricing, the company predicts the net selling price across its portfolio to decline by mid-single digits this year, following a 1% drop in 2018.
While pricing pressure is common for older, legacy products fending off generics or newer competitors, Amgen is tangling with difficult, competitive markets for some of its newer launches too.
Last October, Amgen cut the list price 60% on its cholesterol-lowering medicine Repatha (evolocumab) after the drug struggled to gain traction amid payer pushback and competition from Sanofi and Regeneron's rival drug Praluent (alirocumab).
Repatha now holds a commanding share of the PCSK9 market, but that price cut could impact reported Repatha net sales in the short term, Amgen said.
Aimovig (erenumab) was a bright spot, solidly beating Wall Street's sales expectations in the fourth quarter after a mid-2018 launch. But even there, payer decisions loom large in whether the first-in-class CGRP inhibitor stays on track with its blockbuster expectations. CVS, for instance, prefers rival medicines from Teva and Eli Lilly in its formulary.
With all three therapies debuting with the same $6,900 annual list price, Aimovig's future path appears to be dependent on how well it can secure market share and volume growth.
|Product||Fourth quarter 2018 sales||Fourth quarter 2017 sales||% change|
|Enbrel||$1.3 billion||$1.4 billion||-8%|
|Neulasta||$1.2 billion||$1.1 billion||5%|
|Repatha||$159 million||$98 million||62%|
Multiple Wall Street analysts struggled to see actions management could take to spur near-term growth other than through share buybacks or M&A.
As Leerink's Geoffrey Porges remarked in a note following the call, Amgen's pipeline "lacks major late stage programs, particularly fully owned ones, that could offer near term revenue growth or pivotal trial excitement."
Kennen MacKay, an analyst at RBC Capital, said the weak 2019 guidance could increase pressure on Amgen to use its available cash. The company has roughly $30 billion in cash reserves and about $10.6 billion in free cash flow, MacKay noted.
Amgen aggressively ramped up share buybacks last year, repurchasing $17.9 billion worth of its own stock after buying back only $3.1 billion in 2017. David Meline, Amgen's chief financial officer, called the company's current pace a "reasonable guide" for 2019 on the Jan. 29 earnings call.
On the M&A front, CEO Bob Bradway didn't shoot down the idea of a mega-merger as directly as executives for Pfizer and AbbVie have in recent calls. In fact, Bradway said he expects to look for deals in 2019, primarily within Amgen's therapeutic focuses.
"We do think there will be opportunities," he said. "We think we have the flexibility, the balance sheet and the management resources to look at those transactions and with stocks down considerably from where they were a year ago, I would expect that we will continue to look and look across the waterfront of smaller and larger deals."
Amgen has historically focused on smaller deals, however. Jefferies' Michael Yee noted the biotech's largest deal was buying out Onyx for $10.4 billion in 2013.