10-QPeriod: Q1 FY2018

AMGEN INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 25, 2018For Securities:AMGN

Summary

Amgen Inc.'s first quarter 2018 report shows robust financial performance with a notable increase in net income and diluted earnings per share compared to the prior year. Total revenues grew to $5.55 billion, driven by a 3% increase in product sales, primarily from higher unit demand, although some key products like Neulasta® and Enbrel® saw slight declines. The company also benefited from a significantly lower effective tax rate, a direct result of the U.S. Tax Cuts and Jobs Act of 2017. Operating expenses decreased, contributing to a 5% rise in operating income. Operationally, Amgen completed the acquisition of the remaining 50% of Kirin-Amgen, Inc., consolidating its operations and eliminating future royalty obligations. The company also continued its aggressive capital return program, repurchasing a substantial amount of its common stock and paying dividends. Management expressed confidence in future cash flows, supported by a strong financial position and ongoing investment in the business.

Financial Highlights

54 data points
Beta

Revenue

$5.55B

79.2% Gross Margin

Net Income

$2.31B

41.6% Net Margin

EPS (Diluted)

$3.25

Total Assets

$71.16B

Cash & Equivalents

$9.74B

Free Cash Flow

$2.57B

Financial Statements
Beta
Revenue$5.55B
Cost of Revenue$944.00M
Gross Profit$4.40B
SG&A Expenses$1.13B
Operating Expenses$2.83B
Operating Income$2.73B
Interest Expense$338.00M
Net Income$2.31B
EPS (Basic)$3.27
EPS (Diluted)$3.25
Shares Outstanding (Basic)707.00M
Shares Outstanding (Diluted)711.00M

Key Highlights

  • 1Total revenues increased by 2% to $5.55 billion for Q1 2018, compared to $5.46 billion in Q1 2017.
  • 2Net income rose significantly by 12% to $2.31 billion, with diluted EPS growing 16% to $3.25.
  • 3Product sales grew 3% to $5.34 billion, driven by higher unit demand for key products, despite a decline in Neulasta® and Enbrel® sales.
  • 4Amgen acquired the remaining 50% of Kirin-Amgen, Inc. (K-A) in Q1 2018, consolidating its operations and resulting in an $80 million net gain.
  • 5The effective tax rate decreased substantially to 11.8% in Q1 2018 from 15.8% in Q1 2017, largely due to the U.S. Tax Cuts and Jobs Act.
  • 6The company repurchased approximately $10.7 billion of its common stock in Q1 2018, demonstrating a strong commitment to returning capital to shareholders.
  • 7Cash and cash equivalents, along with marketable securities, totaled $32.17 billion as of March 31, 2018, indicating strong liquidity.

Frequently Asked Questions

The U.S. Tax Cuts and Jobs Act of 2017 significantly lowered Amgen's effective tax rate to 11.8% for the first quarter of 2018, down from 15.8% in the same period of 2017. This reduction is primarily due to the lower U.S. statutory tax rate, although partially offset by U.S. taxes on foreign earnings.

Total product sales saw a 3% increase, driven by higher unit demand. However, sales for Neulasta® decreased by 5% and Enbrel® by 6%, largely due to lower unit demand. Sensipar®/Mimpara® sales grew 18% and Prolia® sales increased 16%, indicating strong performance from these products.

Amgen acquired the remaining 50% of Kirin-Amgen, Inc. (K-A), making it a wholly owned subsidiary. This consolidation eliminated future royalty obligations and resulted in an $80 million net gain recorded in 'Interest and other income, net'. The acquisition was accounted for as a step acquisition, with fair value remeasurement of Amgen's existing stake and settlement of pre-existing relationships.

Amgen is actively returning capital through significant share repurchases and dividend payments. In the first quarter of 2018, the company repurchased approximately $10.7 billion of its stock, including a $10 billion tender offer. It also declared a quarterly cash dividend of $1.32 per share. The company has $3.6 billion remaining under its stock repurchase program as of March 31, 2018, and an additional $5.0 billion was authorized in April 2018.