01—Abstract
Summary
Summary of the 10-K filed February 9, 2021. Cited figures are marked; the original filing is the authoritative source.
Amgen's FY2020 10-K (filed February 2021) shows a company in transition: total revenues rose 9% to $25.4 billiona, driven by Otezla (acquired November 2019), which generated $2.2 billion in 2020 sales, along with MVASI, KANJINTI, and Repatha.
Net income declined 7% to $7.3 billionb and diluted EPS fell 4% to $12.31, pressured by higher cost of sales (24.2% of revenues, up from 18.6%) reflecting Otezla intangible amortization, and by a higher effective tax rate on the BeiGene investment and other items. Operating cash flow rose to $10.5 billion, supporting $3.5 billion of buybacks and $3.8 billion of dividends, with the quarterly dividend raised 10% to $1.60 and to $1.76 for Q1 2021. The legacy franchise remains under pressure.
ENBREL sales fell 4% to $5.0 billionc amid share loss to biosimilars, Neulasta fell 29% to $2.3 billion as biosimilar competition intensified, and Aranesp and EPOGEN declined. Management expects continued net price declines in 2021, more biosimilar launches (including RIABNI, launched January 2021), and additional pricing headwinds from U.S. policy, including the CMS end of TDAPA for calcimimetics and proposed most-favored-nation rules that remain under litigation. Concentration risk is notable: three wholesalers account for 83% of gross revenues, and DaVita accounts for roughly 90% of EPOGEN sales.
The pipeline offers potential upside. Sotorasib (KRAS G12C) received Breakthrough Therapy designation and an NDA under the FDA's RTOR program, with a confirmatory phase 3 underway, and tezepelumab's phase 3 NAVIGATOR trial met its primary endpoint, though the SOURCE trial missed.
Amgen also faces significant legal and tax overhangs, including IRS Puerto Rico profit-allocation disputes for 2010-2015 and $5.6 billiond of remaining repatriation tax payments, plus the Novartis Aimovig litigation and multiple patent cases. Total debt stood at $33.0 billion, with investment-grade ratings (A-/Baa1/BBB+).
02—Key points
Key Highlights
- Total revenues grew 9% to $25.4B and product sales rose 9% to $24.2B, led by Otezla ($2.2B in its first full year) and Repatha (+34%).
- Net income fell 7% to $7.3B and diluted EPS declined 4% to $12.31, as cost of sales rose to 24.2% of revenue from amortization of the Otezla acquisition.
- Neulasta sales dropped 29% to $2.3B and ENBREL fell 4% to $5.0B, reflecting biosimilar erosion that management expects to continue into 2021.
- Operating cash flow of $10.5B funded $3.5B in buybacks, $3.8B in dividends and $3.2B in BeiGene and other equity investments, while the quarterly dividend rose 10% to $1.60.
- Sotorasib received FDA Breakthrough Therapy designation and an NDA under RTOR, and the tezepelumab NAVIGATOR phase 3 trial met its primary endpoint.
- Total debt rose to $33.0B after $8.9B of new issuance, and the company maintains investment-grade ratings of A-, Baa1 and BBB+.
- Significant overhangs include IRS Puerto Rico profit-allocation disputes for 2010-2015, $5.6B of remaining repatriation tax, the Novartis Aimovig litigation, and U.S. drug-pricing reforms including MFN rules.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Amgen Inc kept $0.29.
- Revenue$25.42B100.0%
- Cost of revenue−$6.16B24.2%
- Gross profit$19.27B75.8%
- Operating costs−$10.13B39.8%
- Operating income$9.14B35.9%
- Interest, other & tax−$1.88B7.4%
- Net income$7.26B28.6%
Where FY2020 revenue went
$25.42B- Net income: $7.26B, 29% of revenue
- Cost of revenue: $6.16B, 24% of revenue
- SG&A: $5.73B, 23% of revenue
- Other operating costs: $4.40B, 17% of revenue
- Interest, other & tax: $1.88B, 7.4% of revenue
Kept 29% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 9, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $25.42B$23.36B | +8.8% |
| Cost of Revenue | $6.16B$4.36B | +41.4% |
| Gross Profit | $19.27B$19.01B | +1.4% |
| SG&A Expenses | $5.73B$5.15B | +11.3% |
| Operating Expenses | $16.29B$13.69B | +19.0% |
| Operating Income | $9.14B$9.67B | −5.5% |
| Interest Expense | $1.26B$1.29B | −2.1% |
| Net Income | $7.26B$7.84B | −7.4% |
| EPS (Basic) | $12.40$12.96 | −4.3% |
| EPS (Diluted) | $12.31$12.88 | −4.4% |
| Shares Outstanding (Basic) | 586.00M605.00M | −3.1% |
| Shares Outstanding (Diluted) | 590.00M609.00M | −3.1% |
05—Questions
Frequently Asked Questions
What drove the decline in net income and EPS despite revenue growth?
Operating costs rose faster than revenue. Cost of sales increased 41% to $6.2B, mainly from amortization of the Otezla intangible asset, and SG&A rose 11% on Otezla commercial spending. Interest and other income also fell to $256M from $753M, partly due to lower cash balances and BeiGene losses. The effective tax rate was 10.7%, which was lower than in 2019.
How exposed is Amgen to biosimilar and generic competition?
Substantially exposed. Neulasta and EPOGEN already face U.S. biosimilars, ENBREL has approved biosimilars and ongoing patent litigation, and Amgen has launched its own biosimilars (MVASI, KANJINTI, AVSOLA, RIABNI). Management expects net selling prices to keep declining in 2021, and Sensipar lost most of its market share after generic entry.
What are the main pipeline catalysts for investors?
Sotorasib in KRAS G12C non-small cell lung cancer, which has a confirmatory phase 3 study and an NDA under FDA review, is the most important near-term catalyst. Tezepelumab for severe asthma, with a 2021 regulatory submission planned, and the Otezla COVID-19 and genital psoriasis programs are also key. Setbacks include the IMLYGIC phase 3 futility stop and the omecamtiv mecarbil termination.
What are the largest tax and legal risks?
The IRS has proposed significant adjustments for 2010-2015 tied to profit allocation between U.S. entities and Puerto Rico, and Amgen expects to contest these through litigation. Final resolution is not expected within 12 months. Accrued unrecognized tax benefits total $3.4B, and $5.6B of U.S. repatriation tax is payable through 2025. Other material matters include the Novartis Aimovig breach-of-contract suit and the Humira and Sensipar antitrust class actions.
06—Continue