Stock Market Predictions

Amgen results beat Street; Xgeva sales strong

Stock Market Predictions

The company also implemented its first quarterly dividend, 28 cents a share. Its stock was up 1.9 percent at $54.43 on Friday afternoon on the Nasdaq.

Excluding one-time items, the company earned $1.37 a share in the second quarter. Analysts on average were expecting $1.28, according to Thomson Global Markets I/B/E/S.

Net profit fell to $1.17 billion, or $1.25 a share, from $1.20 billion, or $1.25 a share, a year earlier. Revenue rose 4 percent to $3.96 billion, topping the average Wall Street forecast of $3.78 billion.

"Overall, we think the quarter was solid with very low expectations going into the second quarter," Geoff Meacham, an analyst at JPMorgan, said in a research note.

U.S. sales of Xgeva totaled $73 million in the second quarter, up from $42 million in the first quarter, its first full quarter on the market.

Analysts on average expected U.S. sales of Xgeva, considered Amgen's most important growth driver, of $66 million.

Christopher Raymond, an analyst at Robert W. Baird, sees Xgeva sales hitting at least $1.8 billion in 2014.

Sales of the osteoporosis drug Prolia, which has the same active ingredient as Xgeva, were $44 million in the second quarter, up from $27 million in the first quarter.

Sales of the company's top-selling anemia drug Aranesp, which have been slowing following several years of safety concerns, fell 3 percent to $585 million. Sales of its older anemia drug Epogen fell 17 percent to $543 million.

In January, the Centers for Medicare & Medicaid Services, the federal agency that administers Medicare and Medicaid, changed the way it pays physicians for services and medications provided to dialysis patients.

The changes, which involve paying a fixed amount to dialysis centers for a bundle of services that include medications, give doctors an incentive to reduce the amount of Epogen they use. To counteract that, CMS has initiated a quality improvement program, to be implemented next year, under which centers would be penalized if they provide sub-standard service.

But under a proposed CMS policy, facilities would no longer be penalized for cutting their use of Epogen. That would probably lead to a reduction in use of the drug. CMS's proposal follows a decision by the U.S. Food and Drug Administration in June to add additional warnings to Epogen's label. The drug is one of a class of drugs that have been linked, at higher doses, to an increased risk of cardiovascular problems and stroke.

Eric Schmidt, an analyst at Cowen & Company, said most investors believe the CMS proposal will take effect, even though Amgen will likely fight it.

The company's chief executive, Kevin Sharer, told analysts on a conference call that the company plans to lobby hard against the proposal in Washington, D.C.

"I respect CMS's point of view but I am also confident we have arguments on the patient side that are important," he said. "We've been at this for 20 years and while I'm not predicting any outcome, this isn't our first Rodeo."

If the change takes effect, Amgen said it expects Epogen dose reductions this year of 20 to 25 percent, partially offset by patient population growth and higher prices. He said Amgen has built that into its earnings forecasts.

Previously, the company said it expected dose reductions in the mid-teens.

The company said it expects the majority of the dosing changes to be implemented by the end of 2011, with some residual impact in early 2012.

Sharer said Amgen has considered and rejected the idea of selling off its Epogen business.

"Despite the challenges this business has presented, it remains a very large contributor to revenues and income," he said. "We're not wedded to any given business, but our judgment right now is that we best serve patients and shareholders by managing this business well."

The company said it expects revenue in 2011 to be at the upper end of its current forecast of $15.1 billion to $15.5 billion. It expects 2011 adjusted earnings to be at the upper end of its current forecast of $5.00 to $5.20 a share.

(Reporting by Toni Clarke; editing by John Wallace and Matthew Lewis)