01—Abstract
Summary
Summary of the 10-K filed February 14, 2017. Cited figures are marked; the original filing is the authoritative source.
Amgen's 2016 Form 10-K (filed February 14, 2017) shows a financially strong year: total revenues rose 6% to $22.99 billiona, net income grew 11% to $7.72 billion, and diluted EPS increased 13% to $10.24.
Product sales grew 5% to $21.89 billionb, led by ENBREL (+11% to $5.97 billion), Prolia (+25%), Sensipar/Mimpara (+12%) and XGEVA (+9%), offset by steep declines in EPOGEN (-31%) and NEUPOGEN (-27%) from competition and biosimilars. Operating income rose 16% to $9.79 billion, and operating cash flow grew 6% to $10.4 billion, funding a 27% dividend increase to $1.00 per quarter (with a $1.15 quarterly dividend declared for Q1 2017) and $3.0 billion of buybacks. The filing also flags a more challenging outlook.
Management expects 2017 to be "increasingly challenging," with intensifying ENBREL competition, little benefit from net price increases, and rising biosimilar pressure on several franchises. Neulasta faces U.S. competition after its final material patent expired in October 2015, and the company is exposed to U.S. drug-pricing policy shifts, PBM formulary pressure (Repatha access has been constrained by utilization management), and reliance on a concentrated set of wholesalers and dialysis customers. Total debt rose to $34.6 billionc, though the company carries investment-grade ratings (A / Baa1 / BBB).
Pipeline news was substantial in early 2017: the FOURIER cardiovascular outcomes trial of Repatha met its primary endpoint, EVENITY has a PDUFA date of July 19, 2017, and the Federal Circuit stayed the injunction against Sanofi/Regeneron's alirocumab pending appeal. Investors will likely focus on whether these catalysts can offset the erosion in legacy biologics and the Puerto Rico and tax-reform uncertainties noted in the filing.
02—Key points
Key Highlights
- Revenue and earnings growth: Total revenues +6% to $22.99B; net income +11% to $7.72B; diluted EPS +13% to $10.24, with operating income up 16% to $9.79B.
- Growth engines: Prolia (+25% to $1.64B), ENBREL (+11% to $5.97B), Sensipar/Mimpara (+12%), XGEVA (+9%) and 'Other products' (+27%, including KYPROLIS, Nplate and Repatha) drove sales growth.
- Legacy erosion: EPOGEN fell 31% to $1.28B and NEUPOGEN fell 27% to $765M due to competition and biosimilars; Neulasta sales slipped 1% amid U.S. patent expiry and biosimilar filings.
- Capital return and balance sheet: Dividend raised 27% to $1.00/quarter (Q1 2017 declared at $1.15); $3.0B repurchased; operating cash flow $10.4B; cash and marketable securities $38.1B against $34.6B of debt.
- Pipeline catalysts: Repatha FOURIER cardiovascular outcomes trial met its primary endpoint; EVENITY FDA PDUFA date July 19, 2017; ABP 215 (Avastin biosimilar) PDUFA September 14, 2017; Parsabiv approved by FDA in February 2017.
- Key risks: Management expects 2017 to be increasingly challenging, citing intensifying ENBREL competition, limited pricing benefit, PBM formulary pressure, potential U.S. drug-pricing and ACA changes, and Puerto Rico manufacturing and fiscal risks.
- Litigation exposure: Ongoing PCSK9 patent fight with Sanofi/Regeneron (permanent injunction stayed pending appeal), AMJEVITA and Sensipar patent suits, and biosimilar disputes over Neulasta, EPOGEN and NEUPOGEN; legal charges of $105M recorded in 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Amgen Inc kept $0.34.
- Revenue$22.99B100.0%
- Cost of revenue−$4.16B18.1%
- Gross profit$18.83B81.9%
- Operating costs−$9.04B39.3%
- Operating income$9.79B42.6%
- Interest, other & tax−$2.07B9.0%
- Net income$7.72B33.6%
Where FY2016 revenue went
$22.99B- Net income: $7.72B, 34% of revenue
- SG&A: $5.06B, 22% of revenue
- Cost of revenue: $4.16B, 18% of revenue
- Other operating costs: $3.97B, 17% of revenue
- Interest, other & tax: $2.07B, 9.0% of revenue
Kept 34% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 14, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $22.99B$21.66B | +6.1% |
| Cost of Revenue | $4.16B$4.23B | −1.5% |
| Gross Profit | $18.83B$17.43B | +8.0% |
| SG&A Expenses | $5.06B$4.85B | +4.5% |
| Operating Expenses | $13.20B$13.19B | 0.0% |
| Operating Income | $9.79B$8.47B | +15.6% |
| Interest Expense | $1.26B$1.09B | +15.1% |
| Net Income | $7.72B$6.94B | +11.3% |
| EPS (Basic) | $10.32$9.15 | +12.8% |
| EPS (Diluted) | $10.24$9.06 | +13.0% |
| Shares Outstanding (Basic) | 748.00M758.00M | −1.3% |
| Shares Outstanding (Diluted) | 754.00M766.00M | −1.6% |
05—Questions
Frequently Asked Questions
How did Amgen perform financially in 2016?
Amgen grew total revenues 6% to $22.99 billion and net income 11% to $7.72 billion, with diluted EPS of $10.24 (up 13%). Operating income rose 16% to $9.79 billion as operating expenses were flat despite higher launch spending, reflecting savings from its transformation program.
Which products are driving growth and which are declining?
Growth came from Prolia (+25%), ENBREL (+11%), Sensipar/Mimpara (+12%), XGEVA (+9%) and newer products such as KYPROLIS, Nplate and Repatha. The declines were concentrated in EPOGEN (-31%) and NEUPOGEN (-27%), with Neulasta down 1% as biosimilar and generic competition intensifies.
What is the outlook for 2017 and what are the main risks?
Management said 2017 will be 'increasingly challenging.' They expect intensifying ENBREL competition and little benefit from net pricing. The major risks are U.S. drug-pricing and ACA reform, PBM and payer utilization management (notably for Repatha), biosimilar erosion, Puerto Rico manufacturing and fiscal exposure, and the possibility of U.S. tax reform.
What are the key pipeline catalysts investors should watch?
Key catalysts include an FDA decision on EVENITY for postmenopausal osteoporosis (PDUFA July 19, 2017), an FDA decision on ABP 215 (Avastin biosimilar, September 14, 2017), label expansion for Repatha following positive FOURIER cardiovascular outcomes results, and the outcome of the Federal Circuit appeal on the alirocumab injunction.
How strong is Amgen's balance sheet and how is it returning capital?
Amgen held $38.1 billion of cash and marketable securities against $34.6 billion of total debt, with investment-grade ratings (A from S&P, Baa1 from Moody's, BBB from Fitch). It paid $3.0 billion in dividends and repurchased $3.0 billion of stock in 2016. The quarterly dividend was raised 27% to $1.00, and a $1.15 dividend was declared for Q1 2017. About $35.9 billion of cash is held offshore and would face additional U.S. taxes if repatriated.
06—Continue