01—Abstract
Summary
Summary of the 10-Q filed May 3, 2024. Cited figures are marked; the original filing is the authoritative source.
Amgen Inc. reported a net loss of $113 milliona, or $(0.21) per share, for the first quarter of 2024, a significant shift from the $2.84 billion net income reported in the same period last year.
This change was largely attributed to substantial non-cash charges, including unrealized losses on strategic equity investments and increased amortization and acquisition-related expenses stemming from the recent Horizon Therapeutics acquisition. Despite the net loss, total revenues grew by 22% year-over-year to $7.45 billionb, driven by a 22% increase in product sales to $7.12 billion. The growth in product sales was primarily fueled by volume increases, with significant contributions from newly acquired Horizon products like TEPEZZA and KRYSTEXXA.
Operationally, the company saw robust growth in key products such as Repatha (33%c increase) and TEZSPIRE (80% increase), alongside contributions from the newly acquired Horizon portfolio. However, operating expenses surged by 54%, largely due to the impact of the Horizon acquisition, including higher amortization and acquisition-related costs, alongside increased R&D and SG&A expenses.
The company also continues to navigate complex legal and tax matters, including an ongoing IRS tax dispute with potentially significant financial implications. Amgen's balance sheet remains solid, with substantial cash and cash equivalents, though debt levels remain elevated following the acquisition.
02—Key points
Key Highlights
- Total revenues increased 22% to $7.45 billion, driven by a 22% rise in product sales to $7.12 billion.
- Reported a net loss of $113 million ($0.21 per share) in Q1 2024, compared to a net income of $2.84 billion ($5.28 per share) in Q1 2023, primarily due to acquisition-related expenses and investment losses.
- Acquired Horizon Therapeutics products, TEPEZZA and KRYSTEXXA, contributed $424 million and $235 million respectively to product sales in their first reported quarters.
- Operating expenses increased by 54% to $6.46 billion, heavily influenced by amortization and acquisition costs related to Horizon, as well as higher R&D and SG&A spending.
- Strong volume growth was observed in key products like Repatha (+33%) and TEZSPIRE (+80%), indicating continued market traction for these therapies.
- Amgen continues to manage significant long-term debt ($60.06 billion) and is actively repurchasing debt opportunistically.
- The company highlighted an ongoing IRS tax dispute with potential material adverse impacts, with a trial scheduled for November 2024.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2024, Amgen Inc lost $0.02.
- Revenue$7.45B100.0%
- Cost of revenue−$3.20B43.0%
- Gross profit$4.25B57.0%
- Operating costs−$3.26B43.7%
- Operating income$991.0M13.3%
- Interest, other & tax−$1.10B14.8%
- Net income−$113.0M1.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 3, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $7.45B$6.11B | +22.0% |
| Cost of Revenue | $3.20B$1.72B | +86.0% |
| Gross Profit | $4.25B$4.38B | −3.1% |
| SG&A Expenses | $1.81B$1.26B | +43.7% |
| Operating Expenses | $6.46B$4.18B | +54.3% |
| Operating Income | $991.00M$1.92B | −48.4% |
| Interest Expense | $824.00M$543.00M | +51.7% |
| Net Income | -$113.00M$2.84B | −104.0% |
| EPS (Basic) | $-0.21$5.32 | −103.9% |
| EPS (Diluted) | $-0.21$5.28 | −104.0% |
| Shares Outstanding (Basic) | 536.00M534.00M | +0.4% |
| Shares Outstanding (Diluted) | 536.00M538.00M | −0.4% |
05—Questions
Frequently Asked Questions
What caused the significant drop in net income from $2.84 billion in Q1 2023 to a net loss of $113 million in Q1 2024?
The substantial decline in net income to a net loss was primarily driven by increased operating expenses, particularly higher amortization and acquisition-related expenses due to the acquisition of Horizon Therapeutics. Additionally, the company reported unrealized losses on its strategic equity investments, notably BeiGene and Neumora, which contrasted with unrealized gains in the prior year's period. These factors, combined with interest expense, significantly impacted profitability.
How are the newly acquired Horizon Therapeutics products performing?
The acquired Horizon products are showing strong initial performance. TEPEZZA generated $424 million in product sales, and KRYSTEXXA contributed $235 million in the first quarter of 2024. These products were acquired on October 6, 2023, and their sales are included from that point forward, demonstrating significant revenue generation for Amgen.
What is the status of Amgen's tax dispute with the IRS?
Amgen is actively contesting IRS notices concerning profit allocation between its U.S. and Puerto Rico entities for the years 2010-2015, with potential tax liabilities amounting to billions of dollars plus interest and penalties. The two consolidated cases are scheduled for trial in the U.S. Tax Court starting November 4, 2024. While Amgen believes its position is without merit, the company acknowledges that an adverse outcome could have a material adverse impact on its financial statements. The IRS is also examining years 2016-2018.
How is Amgen managing its debt levels following the Horizon acquisition?
Amgen maintains a substantial level of long-term debt, which stood at $60.06 billion as of March 31, 2024. While the Horizon acquisition likely contributed to the overall debt structure, the company is actively managing its debt through opportunistic repurchases and by prioritizing cash flow generation from operations. Amgen's stated capital allocation strategy includes reducing debt, paying dividends, and repurchasing stock.
06—Continue