10-QPeriod: Q1 FY2013

AMGEN INC Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 3, 2013For Securities:AMGN

Summary

Amgen Inc. reported solid financial results for the first quarter of 2013, demonstrating revenue growth and improved profitability. Total revenues increased by 5% year-over-year to $4.24 billion, driven primarily by a 6% increase in product sales, notably strong performance from Enbrel, Xgeva, and Prolia. Net income saw a significant jump of 21% to $1.43 billion, with diluted Earnings Per Share (EPS) rising by 27% to $1.88. This improved profitability was bolstered by a lower effective income tax rate, largely due to a favorable settlement with the IRS and the retroactive reinstatement of the federal R&D tax credit. The company maintained a strong liquidity position with $21.3 billion in cash, cash equivalents, and marketable securities, although total debt remained substantial at $23.9 billion. Amgen continued its commitment to returning capital to shareholders through robust share repurchases, totaling $771 million in the quarter, and a consistent quarterly dividend. The company also highlighted progress in its product pipeline, including positive Phase 3 results for talimogene laherparepvec in melanoma and the initiation of Phase 3 studies for AMG 416.

Financial Highlights

53 data points
Beta

Revenue

$4.24B

80.4% Gross Margin

Net Income

$1.43B

33.8% Net Margin

EPS (Diluted)

$1.88

Total Assets

$51.64B

Cash & Equivalents

$2.53B

Free Cash Flow

$891.00M

Financial Statements
Beta
Revenue$4.24B
Cost of Revenue$744.00M
Gross Profit$3.41B
SG&A Expenses$1.16B
Operating Expenses$2.80B
Operating Income$1.44B
Interest Expense$263.00M
Net Income$1.43B
EPS (Basic)$1.91
EPS (Diluted)$1.88
Shares Outstanding (Basic)751.00M
Shares Outstanding (Diluted)764.00M

Key Highlights

  • 1Total revenues grew 5% to $4.24 billion, with product sales up 6% to $4.15 billion, driven by strong growth in Enbrel (+11%), Xgeva (+46%), and Prolia (+61%).
  • 2Net income increased significantly by 21% to $1.43 billion, leading to a 27% rise in diluted EPS to $1.88.
  • 3The effective tax rate decreased substantially to (6.8)% from 13.3% in the prior year, primarily due to a favorable IRS settlement and R&D tax credit benefits.
  • 4Cash, cash equivalents, and marketable securities stood at $21.3 billion, providing ample liquidity, though total debt remained at $23.9 billion.
  • 5Amgen actively returned capital to shareholders, repurchasing $771 million in stock and paying $353 million in dividends during the quarter.
  • 6The company reported positive Phase 3 results for talimogene laherparepvec in melanoma, meeting its primary endpoint for durable response rate.
  • 7Operating expenses increased by 9%, largely due to higher R&D spending (up 19%) for late-stage clinical programs and increased Selling, General & Administrative (SG&A) expenses (up 7%).

Frequently Asked Questions

The substantial increase in net income (21%) and diluted EPS (27%) was primarily driven by a combination of factors. Firstly, revenue growth from key products like Enbrel, Xgeva, and Prolia contributed positively. Secondly, and perhaps more significantly, Amgen benefited from a considerably lower effective income tax rate. This was largely due to a favorable settlement of a long-standing IRS examination, which provided a significant tax benefit, and the retroactive reinstatement of the federal R&D tax credit for 2012.

Amgen maintained a strong liquidity position, reporting $21.3 billion in cash, cash equivalents, and marketable securities as of March 31, 2013. While total debt stood at $23.9 billion, the company effectively managed its financing. A significant portion of its debt ($2.5 billion) was settled in February 2013 due to the maturity/conversion of convertible notes. Amgen also indicated plans to continue returning capital to shareholders through share repurchases and dividends, funded by existing cash flow and access to financing.

Product sales grew 6% year-over-year. Notable performances include Enbrel (up 11%), Xgeva (up 46%), and Prolia (up 61%), which collectively contributed to the overall product sales increase. However, sales of Aranesp® declined by 10%, and EPOGEN® saw a 2% decrease. The company also noted that its key products, Neulasta®/NEUPOGEN®, were stable year-over-year, but highlighted upcoming patent expirations for NEUPOGEN® in late 2013, which could lead to increased competition.

In terms of pipeline progress, Amgen announced positive top-line results from a Phase 3 trial for talimogene laherparepvec in melanoma, meeting its primary endpoint for durable response rate. They also initiated Phase 3 studies for AMG 416 for secondary hyperparathyroidism and announced plans for a pivotal study for a biosimilar Herceptin®. Regarding litigation, the company mentioned the dismissal of one stockholder derivative lawsuit and ongoing processes for others, as well as settlements for certain 'Other Qui Tam' actions, noting these resolved matters were immaterial.