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The world's largest biotechnology company by sales reported GAAP net income for the second quarter of $941 million or $0.87 per share, compared to $1.02 billion or $0.90 per share for the year-ago quarter.
Excluding stock options and certain other expenses, adjusted net income for the second quarter was $1.24 billion or $1.14 per share, compared to $1.27 billion or $1.12 per share in the prior year quarter.
Average diluted shares for adjusted earnings per share in the second quarter were 1,080 million compared to 1,132 million in the second quarter of last year.
On average, 18 analysts polled by First Call / Thomson Financial expected the company to earn $1.02 per share for the second quarter.
Thousand Oaks, California-based Amgen said total revenue for the second quarter increased 1% to $3.76 billion from $3.73 billion in the same quarter last year. Twenty analysts had a consensus revenue estimate of $3.58 billion for the second quarter.
Total product sales for the second quarter grew 2% to $3.69 billion from $3.60 billion in the second quarter of last year, with a favorable foreign-exchange rate contributing $93 million. U.S. sales fell 1% to $2.84 billion from $2.88 billion a year ago, while international sales rose 17% to $849 million from $725 million last year.
Global sales of Aranesp, which is prescribed for the treatment of in cancer patients undergoing chemotherapy, fell 13% to $825 million in the second quarter from $949 million a year ago due to declining U.S. sales.
U.S. Aranesp sales for the quarter dropped 26% to $427 million from $578 million last year, reflecting the negative impact on demand, mainly in the supportive cancer care setting, of ongoing regulatory and reimbursement changes that were principally realized in the second half of 2007.
International Aranesp sales for the quarter increased 7% to $398 million from $371 million in the year-ago quarter, mainly due to positive impact of foreign exchange.
Second quarter sales of Epogen, an older anemia drug for patients with chronic kidney disease, declined slightly to $622 million from $624 million a year ago. The company said the increase in demand due to patient population growth was offset mainly due to a reduction in dose / utilization due to ESA label changes and implementation of the Erythropoietin Monitoring Policy.
Aranesp and Epogen, which come under the class erythropoiesis stimulating agents or ESAs, are approved by the FDA to increase the number of red blood cells in cancer patients whose chemotherapy causes anemia and to avoid blood transfusions. But doctors have been prescribing these drugs to treat patients whose anemia stems from the cancer itself and to improve the quality of life of anemic patients by using them to stimulate creation of energy-boosting red blood cells.
Scientists found that increasing red blood cell counts over 12.5 grams per deciliter in anemic kidney patients, compared to the FDA's recommended dosing level of 10 to 12, results in heart problems or death. Following the new findings, the FDA slapped a black-box" warning on Amgen's Aranesp and Epogen, and Johnson & Johnson's Procrit in March 2007, alerting doctors to rein in the use of these drugs by using the lowest dose of medication.
In July 2007, the Centers for Medicare & Medicaid Services or CMS tightened the rules for prescribing anti-anemia medicines to cancer patients on Medicare. According to the new rules proposed by the CMS, cancer patients undergoing chemotherapy should be prescribed anemia drugs only if their red blood cell count falls below 10 milligrams per deciliter. The new rules of Medicare will cover the anemia drugs to a maximum of eight weeks after completion of chemotherapy.
The new Medicare rule of payment limits for anemia drugs as well as FDA's decision to slap its strongest warning label on the anemia drugs have hurt the sales of Aranesp and Epogen.
Earlier this month, Amgen agreed to pay $200 million to Johnson & Johnson unit Ortho Biotech Products to settle an antitrust lawsuit regarding Amgen's marketing of Aranesp.
Combined worldwide sales of Neupogen, an erythropoietin and a white blood cell booster to treat a side effect of chemotherapy, and Neulasta, a long lasting version of Neupogen, increased 15% to $1.20 billion from $1.04 billion a year ago, driven primarily by higher demand for Neulasta.
Second quarter sales of rheumatoid arthritis drug Enbrel increased 2% to $841 million from $823 million last year, driven by higher demand.
For the first six months of the year, the company reported GAAP net income of $2.08 billion or $1.91 per share, compared to $2.13 billion or $1.84 per share for the same period last year.
Adjusted net income for the first-half was $2.45 billion or $2.26 per share, compared to $2.54 billion or $2.20 per share in the prior year period.
Total revenue for the first-half declined to $7.38 billion from $7.42 billion in the first-half of last year.
During the second quarter, Amgen repurchased about 33 million shares of its common stock for $1.5 billion. The company currently has $4.9 billion remaining under its authorized stock repurchase program. Last week, Amgen announced that the FDA has sought additional information from the company to support the use of Enbrel in pediatric patients with moderate to severe plaque psoriasis. The company continues to work with the FDA to provide information to address additional questions related to the supplemental biologics license application, but said it cannot speculate on the timing of the FDA's response.
The company also last week announced that its pivotal Phase 3 fracture study, evaluating its RANK Ligand inhibitor denosumab for treating postmenopausal osteoporosis, met primary and all secondary endpoints. The company is banking on denosumab to offset declining sales of its anemia drugs.
Looking forward, the company raised its revenue and adjusted earnings outlook for the full year 2008. The company said it now expects revenue of $14.6 billion to $14.9 billion and adjusted earnings of $4.25 to $4.45 per share for the full year 2008. Previously, the company expected revenue of $14.2 billion to $14.6 billion and adjusted earnings of $4.00 to $4.30 per share for the current year.
Analysts currently expect the company to earn $4.19 per share on revenue of $14.42 billion for the full year 2008.
"Our business showed good stability through the first half of the year, giving us confidence to increase our previously issued guidance on a full year basis," said Kevin Sharer, Amgen chairman and chief executive officer.
There has been a slow down in Amgen's revenue growth during the past few years. In 2005, the company's total revenue jumped 18% to $12.4 billion from 2004. The revenue growth slipped to 15% in 2006 and worse still was the revenue growth in 2007. During 2007, the company's revenues rose 4% to $14.77 billion from $14.27 billion in 2006.
Earlier this month, Genentech, Inc. (DNA | Quote | Chart | News | PowerRating), world's second largest biotechnology company by sales, reported second quarter earnings that increased from last year, helped mainly by double-digit sales growth of its top cancer drugs Avastin and Rituxan. However, the company's quarterly earnings per share, excluding items, came in below analysts' expectations. At the same time, the company raised its earnings guidance for the full year 2008.
South San Francisco, California-based Genentech, which is majority owned by Swiss drugmaker Roche, is the currently world's largest biotechnology company in terms of market capitalization and second largest in terms of annual sales behind Amgen Inc. (AMGN | Quote | Chart | News | PowerRating).
Last week, Roche offered to buy the remaining stake in Genentech for $89.00 per share in cash for a total of about $43.7 billion. Roche, which owns a 55.9% stake in Genentech as of June 30, said it expects to close the acquisition as soon as possible following negotiation of a definitive merger agreement.
Amgen shares closed Monday's regular trading session at a new 52 week high of $60.48, up $6.56 or 12.17% and gained an additional 96 cents or 1.59% in after hours trading.
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