Amgen woes hit bottom line
Biotech giant Amgen Inc. -- battered by regulators, stung by falling sales of its top drugs and hit by layoffs this summer -- began Wednesday to spell out the price it has paid.
The Thousand Oaks-based firm said its profit decreased 82% compared with a year earlier. The company said it wrote off $850 million in costs to shutter manufacturing plants and reduce its workforce by 2,600 employees.
Sales of Aranesp, Amgen’s flagship anemia drug, fell by 36% after a July decision by federal officials to cut back on the size of the dosage of anemia drugs that Medicare would cover after studies raised safety concerns, the company said.
Wall Street appeared unenthusiastic about the drug maker’s third-quarter earnings. Amgen shares closed at $58.13, up 43 cents, but fell in after-hours trading after results were released.
Amgen Chief Executive Kevin Sharer, however, offered an upbeat assessment: “We are making good progress in implementing a global restructuring plan to rationalize our cost structure and improve cash flow, while continuing to invest in the future.”
The company said third-quarter net income, minus charges, decreased to $1.18 billion compared with $1.22 billion a year earlier. Sales remained flat at $3.6 billion.
Amgen’s U.S. Aranesp sales were $460 million compared with $720 million in the same period last year. Sales of Epogen, another anemia drug, decreased 5% to $602 million over the last three months.
Sales of Amgen’s rheumatoid arthritis treatment, Enbrel, now the company’s top-selling product, rose 16% to $821 million.
The company announced plans in August to lay off 14% of its workforce and reduce its capital spending next year by $1 billion.
Les Funtleyder, a biotech analyst for Miller Tabak & Co., said the company’s weaker sales weren’t surprising but said it probably would be several more quarters before investors could get comfortable about Amgen’s earnings.
“The take home here is it’s really hard to put a value on the stock until the anemia sales stop decelerating,” Funtleyder said.
Amgen has publicly denounced Medicare’s decision on reimbursement for anemia drugs, saying it was not in the best interest of patients. The company appeared to hold out hope that it could change the minds of Medicare officials, although such reversals are rare.
On Wednesday, however, Medicare’s medical chief said no new evidence had emerged to support reversing the new stricter reimbursement policy .
In recent months, Amgen has significantly beefed up its lobbying presence in Washington. The company spent nearly $9.1 million in the first half of 2007 to lobby the federal government, according to federal disclosure records, doubling its spending from the previous six months.
Amgen this week won a jury verdict in a patent infringement case that prevents Swiss drug maker Roche Holding Ltd. from selling a competing anemia medicine in the United States.
Analyst Funtleyder believes that Amgen is at a crossroads.
“Things could get better or they could get worse. It’s wait-and-see time,” he said.