Amgen (AMGN) to Report Q1 Earnings: Is a Beat in the Cards?

We expect biotech major Amgen Inc. AMGN to beat expectations when it reports first-quarter 2018 results on Apr 24, after market close. Amgen delivered a negative earnings surprise of 4.93% in the last quarter.

Amgen shares have declined 0.6% in the past year. Still, this compares favorably with the 8.4% decrease registered by the industry during this period.

Amgen’s performance has been modest, with the company delivering a positive surprise in three out of the trailing four quarters. The average earnings beat over the last four quarters is 2.93%.

Amgen Inc. Price and EPS Surprise

 

Amgen Inc. Price and EPS Surprise | Amgen Inc. Quote

Let’s see how things are shaping up for the company this quarter.

Factors at Play

The first-quarter usually generates the lowest product sales for Amgen.

Amgen’s newer products like Prolia, Kyprolis, Xgeva and Blincyto are likely to perform well backed by higher demand. This will make up for lower sales of mature brands like Enbrel, Aranesp, Epogen, Neulasta and Neupogen due to competitive pressure.

In 2017 and early 2018, Amgen gained FDA approval to include overall survival data in the labels for Kyprolis and Blincyto, which may reflect in first-quarter sales of these drugs. In January, Xgeva gained FDA approval for the prevention of skeletal-related events in patients with multiple myeloma. The label extension can boost sales of the drug.

Neulasta demand is being hurt by competition from PD-1s and other new cancer therapies

Neupogen sales are also being hurt by biosimilar competition in the United States, mainly from Zarxio, Sandoz’s biosimilar version of Neupogen

We expect Neulasta and Neupogen first-quarter sales to be hurt by competitive dynamics. Neulasta and Epogen are expected to start facing biosimilar competition in the United States this year. Also, Sensipar sales are likely to decline sharply the soon-to-be reported quarter as the drug lost patent exclusivity in March 2018.

Enbrel sales are expected to be hurt by increased pricing and competitive pressure. Enbrel is one of the main drivers of Amgen’s revenues.

On the fourth-quarter conference call, Amgen said that sales of Enbrel in the first quarter are expected to be the lowest in 2018, representing approximately 20% of full-year sales. Also Repatha sales in the first quarter are expected to be relatively flat sequentially hurt by insurance verifications and patient out-of-pocket costs. Also investors will be keen to know if sales of Repatha have improved with the inclusion of FOURIER outcomes data on its label.

Amgen and partner Allergan’s AGN biosimilar version of Roche’s cancer drug Avastin, Mvasi was approved in EU in January, which should boost first-quarter sales of the drug.

Investor focus on the call will be on management’s comments on the preparations for the potential launch of migraine candidate, Aimovig. The FDA is expected to give its decision on Aimovig biologics license application (BLA) in mid-May.

Meanwhile, higher investments to support product launches is likely to result in higher SG&A costs in the to-be reported quarter.

Earnings Whispers

Our proven model shows that Amgen is likely to beat on earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate ($3.34 per share) and the Zacks Consensus Estimate ($3.23 per share) is +3.34%. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Amgen has a Zacks Rank #3. The combination of Amgen’s Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.

Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Biotech stocks that have both a positive ESP and a favorable Zacks Rank include:

Alexion Pharmaceuticals, Inc. ALXN, scheduled to release results on Apr 26, has an Earnings ESP of +2.09% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene Corporation CELG has an Earnings ESP of +0.63% and a Zacks Rank #3. The company is scheduled to release results on May 4.

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