01—Abstract
Summary
Summary of the 10-K filed February 16, 2022. Cited figures are marked; the original filing is the authoritative source.
Amgen's FY2021 10-K shows a company with flat total product sales of $24.3 billiona (U.S. down 4% to $17.3 billion, ROW up 12% to $7.0 billion) while operating income fell 16% to $7.6 billion and diluted EPS declined 16% to $10.28, reflecting lower net selling prices from biosimilar and generic competition, a $1.5 billion acquired IPR&D charge for the Five Prime acquisition (bemarituzumab), and higher cost of sales.
Total revenues rose 2% to $26.0 billionb, aided by growth in Prolia, Repatha, Nplate, Otezla and TEZSPIRE, offset by declines in Neulasta (down 24%), ENBREL (down 11%) and Parsabiv. Management expects continued net price erosion in 2022 as biosimilar competition intensifies, with Amgen's own biosimilars (MVASI, KANJINTI, AMGEVITA, AVSOLA, RIABNI) partly offsetting that pressure in new markets. Capital allocation remained shareholder-focused: operating cash flow of $9.3 billion funded $5.0 billion of buybacks, $4.0 billion of dividends (quarterly dividend raised 10% to $1.76 per share, and to $1.94 for Q1 2022), and $880 million of capex, with the Board adding $12.9 billion to the repurchase authorization during 2021.
Stockholders' equity fell to $6.7 billionc and the company carries an accumulated deficit, a consequence of buybacks and dividends exceeding earnings, but management states this does not impair its ability to operate or service $33.3 billion of long-term debt, rated A-/Baa1/BBB+ by S&P, Moody's and Fitch. Investors should also weigh a large contingent tax exposure: the IRS has asserted approximately $3.6 billion of additional federal tax (plus interest) for 2010 to 2012 over Puerto Rico profit allocation, with similar 2013 to 2015 adjustments expected, and Amgen is contesting these in U.S. Tax Court.
Key forward-looking risks include U.S. drug-pricing reform (IRA-style negotiation proposals, rebate reform, copay-assistance restrictions), biosimilar erosion of Neulasta, EPOGEN and ENBREL, concentration of sales among three wholesalers (82% of gross revenue), and Puerto Rico manufacturing exposure. Amgen's R&D spend rose to $4.8 billiond, and the company's 13 phase 3 programs and newly approved indications (LUMAKRAS, TEZSPIRE, Otezla psoriasis expansion) represent the main pipeline catalysts.
02—Key points
Key Highlights
- Total revenues grew 2% to $25.98 billion, but operating income fell 16% to $7.64 billion and net income fell 19% to $5.89 billion, driven by a $1.5 billion acquired IPR&D charge and higher cost of sales.
- Diluted EPS of $10.28 declined 16% from $12.31 in 2020; diluted share count fell 3% to 573 million due to buybacks.
- U.S. product sales fell 4% to $17.3 billion on lower net selling prices, while ROW product sales rose 12% to $7.0 billion on volume growth.
- Neulasta (-24%) and ENBREL (-11%) declined on biosimilar competition and net price erosion; Prolia (+18%), Repatha (+26%) and Nplate (+21%) were the main growth drivers.
- Returned $9.0 billion to shareholders in 2021 ($5.0 billion buybacks, $4.0 billion dividends), with $10.9 billion remaining under the repurchase authorization.
- Stockholders' equity dropped to $6.7 billion with an accumulated deficit; long-term debt of $33.2 billion remains investment grade (A-/Baa1/BBB+).
- Contesting IRS assertions of approximately $3.6 billion in additional federal tax (plus interest) for 2010-2012 related to Puerto Rico profit allocation, with similar 2013-2015 adjustments anticipated.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Amgen Inc kept $0.23.
- Revenue$25.98B100.0%
- Cost of revenue−$6.45B24.8%
- Gross profit$19.52B75.2%
- Operating costs−$11.89B45.8%
- Operating income$7.64B29.4%
- Interest, other & tax−$1.75B6.7%
- Net income$5.89B22.7%
Where FY2021 revenue went
$25.98B- Other operating costs: $6.52B, 25% of revenue
- Cost of revenue: $6.45B, 25% of revenue
- Net income: $5.89B, 23% of revenue
- SG&A: $5.37B, 21% of revenue
- Interest, other & tax: $1.75B, 6.7% of revenue
Kept 23% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 16, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $25.98B$25.42B | +2.2% |
| Cost of Revenue | $6.45B$6.16B | +4.8% |
| Gross Profit | $19.52B$19.27B | +1.3% |
| SG&A Expenses | $5.37B$5.73B | −6.3% |
| Operating Expenses | $18.34B$16.29B | +12.6% |
| Operating Income | $7.64B$9.14B | −16.4% |
| Interest Expense | $1.20B$1.26B | −5.2% |
| Net Income | $5.89B$7.26B | −18.9% |
| EPS (Basic) | $10.34$12.40 | −16.6% |
| EPS (Diluted) | $10.28$12.31 | −16.5% |
| Shares Outstanding (Basic) | 570.00M586.00M | −2.7% |
| Shares Outstanding (Diluted) | 573.00M590.00M | −2.9% |
05—Questions
Frequently Asked Questions
Why did Amgen's earnings decline in 2021 even though revenue grew?
Total revenues rose 2%, but operating expenses increased 13%, driven mainly by a $1.5 billion acquired IPR&D charge for bemarituzumab from the Five Prime acquisition and a $400 million upfront payment to Kyowa Kirin. Cost of sales also rose to 24.8% of revenue from 24.2%, due to product mix and higher profit-share and royalty expenses. The acquired IPR&D charge was not tax deductible, which pushed the effective tax rate up to 12.1%.
How is biosimilar competition affecting Amgen's sales?
Biosimilars of Neulasta, EPOGEN and ENBREL have intensified price erosion and reduced unit demand. Neulasta sales fell 24% and ENBREL fell 11%. Management expects net selling prices to keep declining in 2022 at the portfolio level. Amgen is partly offsetting this with its own biosimilars, including MVASI, KANJINTI, AMGEVITA, AVSOLA and RIABNI, and plans to launch AMJEVITA in the U.S. in January 2023.
What is the main tax risk investors should understand?
The IRS has proposed adjustments that primarily reallocate profits between Amgen's U.S. entities and its Puerto Rico operations for 2010-2012, seeking approximately $3.6 billion of additional federal tax plus interest, partly offset by up to about $900 million of previously accrued repatriation tax. Similar adjustments for 2013-2015 are expected. Amgen is contesting these in U.S. Tax Court and believes the IRS positions lack merit, but management acknowledges final payments could be substantially greater than amounts accrued, and resolution is not expected within 12 months.
How is Amgen returning capital while carrying a shareholders' deficit-like equity position?
Amgen funded $9.0 billion of shareholder returns in 2021 from $9.3 billion of operating cash flow and debt issuance of $5.0 billion, while repaying $4.2 billion of maturing debt. Repurchases and dividends exceeded net income, which produced an accumulated deficit and reduced equity to $6.7 billion. Management says existing cash, operating cash flow and investment-grade access to debt markets are sufficient to meet obligations, and it raised the quarterly dividend 10% to $1.94 for Q1 2022.
What are the key pipeline and regulatory catalysts for 2022?
Recent approvals include LUMAKRAS (KRAS G12C NSCLC, accelerated approval in the U.S. and conditional approval in the EU), TEZSPIRE for severe asthma (co-developed with AstraZeneca), and the expanded Otezla label for plaque psoriasis across all severities. Bemarituzumab holds FDA Breakthrough Therapy designation for gastric cancer, and the company has 13 phase 3 programs. R&D spending rose to $4.8 billion. Investors should also watch U.S. drug-pricing legislation, which could affect Medicare Part B and D pricing and copay assistance, and the pending Neulasta patent litigation against Pfizer.
06—Continue