01—Abstract
Summary
Summary of the 10-K filed February 27, 2013. Cited figures are marked; the original filing is the authoritative source.
Amgen's 2012 Form 10-K shows a company growing revenue 11% to $17.3 billiona, with net income up 18% to $4.3 billion and diluted EPS up 37% to $5.52.
Growth was led by ENBREL (sales up 14% to $4.2 billion), XGEVA/Prolia (up to $1.2 billionb from $554 million), and Neulasta/NEUPOGEN (up 3% to $5.4 billion). The main offsets were the ESA franchise (Aranesp down 11% and EPOGEN down 5%), driven by 2011 label and reimbursement changes. Higher ENBREL profit-share expense and a Puerto Rico excise tax also pressured gross margin, with cost of sales rising to 17.5% of product sales.
The filing highlights medium-term risks that investors should weigh. Patents on NEUPOGEN and EPOGEN expire around late 2013, and the company expects increasing biosimilar competition in the U.S. and Europe. ENBREL's Pfizer co-promotion ends October 2013, and the company faces competition from several newer RA and psoriasis therapies.
The company also resolved its federal sales and marketing investigations on December 19, 2012, paying about $612 millionc in civil settlements and $150 million in criminal fines, and entered a five-year corporate integrity agreement. In January 2013 the RED-HF Aranesp heart-failure trial missed its primary endpoint. Capital allocation remains shareholder-friendly.
Amgen repurchased $4.7 billiond of stock in 2012 and raised its quarterly dividend 31% to $0.47, payable March 2013. Total debt rose to $26.5 billion, while cash and marketable securities were $24.1 billion.
Roughly $18.9 billion of cash sits in foreign jurisdictions, which would face additional U.S. taxes if repatriated. Pipeline progress included four programs advancing to phase 3 (AMG 145, brodalumab, romosozumab, rilotumumab), offset partly by the acquisitions of Micromet, KAI, MN, and deCODE.
02—Key points
Key Highlights
- Total revenues rose 11% to $17.3 billion, and net income grew 18% to $4.3 billion, with diluted EPS of $5.52 (up 37%) helped by a 14% decline in diluted share count from buybacks.
- ENBREL sales grew 14% to $4.2 billion, and XGEVA/Prolia combined sales more than doubled to $1.2 billion, becoming important new growth drivers.
- ESA sales declined as Aranesp fell 11% to $2.0 billion and EPOGEN fell 5% to $1.9 billion, following the 2011 FDA label changes and CMS reimbursement changes.
- Patent expirations loom: U.S. NEUPOGEN patents expire in December 2013, with competition expected from Q4 2013, and the company expects greater biosimilar competition across products.
- Cost of sales rose to 17.5% of product sales from 15.9%, driven by product mix and the Puerto Rico excise tax, and SG&A grew 7% largely due to higher ENBREL profit-share expense of $1.5 billion.
- The company returned capital through $4.7 billion in buybacks and a dividend increased 31% to $0.47 per quarter, while total debt climbed to $26.5 billion against $24.1 billion in cash and securities.
- The December 2012 settlement of federal and state sales-practice investigations cost about $762 million in combined civil and criminal payments, and a five-year corporate integrity agreement now applies.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Amgen Inc kept $0.25.
- Revenue$17.27B100.0%
- Cost of revenue−$3.20B18.5%
- Gross profit$14.07B81.5%
- Operating costs−$8.49B49.2%
- Operating income$5.58B32.3%
- Interest, other & tax−$1.23B7.1%
- Net income$4.34B25.2%
Where FY2012 revenue went
$17.27B- SG&A: $4.81B, 28% of revenue
- Net income: $4.34B, 25% of revenue
- Other operating costs: $3.67B, 21% of revenue
- Cost of revenue: $3.20B, 19% of revenue
- Interest, other & tax: $1.23B, 7.1% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 27, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $17.27B$15.58B | +10.8% |
| Cost of Revenue | $3.20B$2.71B | +18.1% |
| Gross Profit | $14.07B$12.87B | +9.3% |
| SG&A Expenses | $4.81B$4.50B | +7.0% |
| Operating Expenses | $11.69B$11.27B | +3.7% |
| Operating Income | $5.58B$4.31B | +29.3% |
| Interest Expense | $1.05B$610.00M | +72.6% |
| Net Income | $4.34B$3.68B | +18.0% |
| EPS (Basic) | $5.61$4.07 | +37.8% |
| EPS (Diluted) | $5.52$4.04 | +36.6% |
| Shares Outstanding (Basic) | 775.00M905.00M | −14.4% |
| Shares Outstanding (Diluted) | 787.00M912.00M | −13.7% |
05—Questions
Frequently Asked Questions
How did Amgen's core products perform in 2012?
Growth was concentrated in ENBREL (+14%), XGEVA/Prolia (combined $1.2 billion, up from $554 million), and Neulasta/NEUPOGEN (+3%). ESA products declined, with Aranesp down 11% and EPOGEN down 5%, reflecting 2011 label and reimbursement changes that reduced dose utilization.
What are the biggest risks to Amgen's future revenue?
The main risks are biosimilar competition after patent expirations (NEUPOGEN in the U.S. from late 2013, EPOGEN and Aranesp over time), the end of the ENBREL Pfizer co-promotion in October 2013, increasing competition for ENBREL, EPOGEN and XGEVA, and continued pricing and reimbursement pressure in the U.S. and Europe.
Did Amgen resolve its legal and regulatory issues in 2012?
Largely yes. On December 19, 2012, Amgen settled federal and state investigations into its sales and marketing practices, paying about $612 million civilly and $150 million criminally, and pleading guilty to one misdemeanor misbranding count. Some matters remain pending, including the remaining Original Qui Tam action and certain securities and derivative suits. The company also entered a five-year corporate integrity agreement.
How is Amgen returning capital to shareholders?
In 2012 Amgen repurchased $4.7 billion of common stock and paid $1.1 billion in dividends. The board increased the buyback authorization by $2 billion in December 2012, leaving $2.3 billion available, and raised the quarterly dividend 31% to $0.47 per share, payable March 2013.
What pipeline developments matter most for investors?
Four candidates advanced to phase 3 in 2012: AMG 145 (PCSK9 antibody for hyperlipidemia), brodalumab (psoriasis), romosozumab (osteoporosis, with UCB), and rilotumumab (gastric cancer). Offsetting this, the RED-HF Aranesp heart-failure trial missed its primary endpoint in January 2013, and the company dropped several programs, including ganitumab and Sensipar in cardiovascular disease.
06—Continue