Amgen Profit Rises 26% but Slowdown Is Likely
Amgen Inc. said Thursday that its profit grew 26% in the fourth quarter on strong sales of cancer-related products but warned that the pace would slow in 2005.
The biotechnology company’s results fell short of expectations on Wall Street, and its shares fell $1.98 to $61.58 in Nasdaq trading.
The Thousand Oaks company’s net income was $689 million, or 53 cents a share, up from $547 million, or 41 cents, a year earlier. Excluding acquisition-related expenses and other charges, net income was $749 million, or 58 cents a share, a 22% gain from $615 million, or 46 cents. And revenue was $2.9 billion, up 24% from $2.3 billion.
The per-share results missed Wall Street’s forecast by 3 cents, according to Thomson First Call.
Chief Executive Kevin Sharer, who said Amgen met its own projections, defended the company’s performance in a conference call with analysts.
“2004 was a great year for Amgen,” he said. “We delivered across the board on earnings, and we invested in the future.”
Sharer said 2005 would be challenging for the company because of changes in Medicare reimbursement for oncology drugs that take effect this month.
The reimbursement revisions may shift some cancer patients from smaller clinics to large clinics and hospitals, where Amgen rival Johnson & Johnson is thought to have a larger market share. The two firms sell competing versions of a drug for anemia, a side effect of some cancer treatments.
Sharer said the effect of the Medicare changes would play out during the first half of 2005.
“It’s a time of watchful waiting,” he said. “We’re more confident that physicians will find a way to do the right thing for our patients. But it will be a challenge for us.”
Amgen expects total revenue growth in 2005 to be in the high single-digits to low-teens.
Adjusted earnings per share should range from $2.70 to $2.85, Amgen said, representing a growth rate of 13% to 19%.
The forecast doesn’t include costs of expensing stock options, which should shave 13 cents to 17 cents from earnings on a full-year basis, the company said. All publicly traded companies are required to begin expensing stock options in the second half of 2005.
Matthew Geller, an analyst at CIBC World Markets, said he saw decelerating growth for Amgen through 2006. Sales could pick up after that, Geller said, depending on the outcome of studies underway at Amgen of an osteoporosis treatment called AMG 162. Results from early tests look good, he said.
“It could be a multibillion-dollar drug for them,” he said.
Geller said Amgen’s performance in the fourth quarter, though less than expected, was solid. Investments in drug research and marketing ate into profit, he said, but added spending would help Amgen build for the future.
“They met the revenue number and that is what investors look at,” Geller said.
Amgen also reported results for the year. Net income for all of 2004 was $2.4 billion, or $1.81 a share, a 4% increase from $2.3 billion, or $1.69, in 2003. Revenue in 2004 was $10.6 billion, up 26% from $8.4 billion in 2003.
Epogen, an anemia drug used by kidney dialysis patients in the United States, remained Amgen’s biggest product in 2004 with sales of $2.6 billion. Close behind it was Aranesp, a follow-on anemia product, with worldwide sales of $2.5 billion.
Enbrel, a rheumatoid arthritis drug Amgen acquired when it purchased Immunex Corp. in 2002, had sales of $1.9 billion.
