Amgen (NASDAQ:AMGN) Q3 Drug Sales Frustrate Investors; Is the Stock Still a Buy?

Stronger operating margins and lower costs helped Amgen Inc. (NASDAQ:AMGN) post third-quarter earnings that topped estimates, but investors were not that pleased as the biotech giant registered declines in sales of some of its key products and a new drug.

The company’s stock, which is up 21 percent in 2017, slid nearly 2 percent in the latest trading session.

Amgen also revised its full-year earnings forecast from $12.15 to $12.65 per share previously to $12.50 to $12.70 per share. This comes even as the company expects to take a financial blow from the impact of Hurricane Maria on its Puerto Rico operations.

Drug Sales

Estimates compiled by Bloomberg found that Amgen came up short with sales of its Repatha, Krypolis, Aranesp, Prolia and Xgeva drugs for the quarter. Sales for Repatha, the company’s costly cholesterol-lowering drug, totaled $89 million during the period, well below analyst estimates of $106 million. Eric Schmidt, an analyst with Cowen Co., even described Repatha’s launch as “disappointing.” Still, Amgen remained optimistic that Repatha will turn out as a key product for the company. Amgen hopes to secure U.S. regulatory approval in December to promote data which shows that the drug helps reduce the risk of strokes and heart attacks, as this could help drive up sales.

“Improving patient access to Repatha remains a top priority for our team,” Amgen CEO Robert Bradway said in a conference call discussing the results.

The company also reported declines of 6 percent for sales of both Enbrel and Neulasta, two of its biggest products. Arthritis drug Enbrel suffered from tighter competition, while Neulasta, which helps cancer patients prevent infections, was affected by a shift in timing of purchases by some larger-end customers. Amgen’s third-quarter revenue totaled $5.8 billion, down 1 percent year over year, while adjusted earnings were $3.27 per share, compared to $3.02 per share in the year-ago period. Analysts on average estimated adjusted earnings of $3.11 per share on revenue of $5.8 billion.

Buy Or Sell?

Amgen remains one of the largest biotech companies in the world in terms of market cap. As reported previously, some analyst concerns about the stock are ill-founded. The company has cash to spend. Continuing its trend from the second quarter, Amgen generated $3.3 billion of free cash flow. This compares to $2.5 billion in the year-ago period, and the difference was helped by lower expenditures and improved collections. It’s dividend of $1.15 per share, which is a 15 percent increase on a yearly basis, was paid out in September. During the quarter, Amgen also bought back about $800 million of its shares.

Amgen is down 1.27 percent in after-hours trading at $175.25 per share.

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