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Amgen Reports Third Quarter 2019 Financial Results Amgen (NASDAQ:AMGN) today announced financial results for the third quarter of 2019. Key results include: Total revenues decreased 3% to $5.7 billion ...

Tuesday, October 29, 2019 7 min read
Key Takeaway: THOUSAND OAKS, Calif. , Oct. 29, 2019 /PRNewswire/ -- Amgen (NASDAQ: AMGN ) today announced financial results for the third quarter of 2019. Key results include: "Amgen continues to execute well in a dynamic environment, with many of our innovative medicines delivering double-di

Full Press Release Details

THOUSAND OAKS, Calif. , Oct. 29, 2019 /PRNewswire/ -- Amgen (NASDAQ: AMGN ) today announced financial results for the third quarter of 2019. Key results include:
"Amgen continues to execute well in a dynamic environment, with many of our innovative medicines delivering double-digit, volume-driven growth, complemented by the strong performance of our recently launched biosimilar products," said Robert A. Bradway , chairman and chief executive officer. "We continue to advance numerous first-in-class medicines in our pipeline, while also pursuing external opportunities that will contribute to our long-term growth, such as our pending acquisition of Otezla."
$Millions, except EPS, dividend per share and percentages Q3'19 Q3'18 YOY Δ
Total Revenues $ 5,737 $ 5,904 (3%)
GAAP Operating Income $ 2,476 $ 2,323 7%
GAAP Net Income $ 1,968 $ 1,859 6%
GAAP EPS $ 3.27 $ 2.86 14%
Non-GAAP Operating Income $ 2,793 $ 2,971 (6%)
Non-GAAP Net Income $ 2,201 $ 2,392 (8%)
Non-GAAP EPS $ 3.66 $ 3.69 (1%)
Dividend Per Share $ 1.45 $ 1.32 10%
Product Sales Performance
Product Sales Detail by Product and Geographic Region
$Millions, except percentages Q3'19 Q3'18 YOY Δ
US ROW TOTAL TOTAL TOTAL
Prolia ® $ 425 $ 205 $ 630 $ 532 18%
EVENITY ® 12 47 59 — *
Repatha ® 85 83 168 120 40%
Aimovig ® 66 — 66 22 *
Parsabiv ® 137 20 157 102 54%
KYPROLIS ® 163 103 266 232 15%
XGEVA ® 356 120 476 433 10%
Vectibix ® 79 117 196 181 8%
Nplate ® 119 76 195 177 10%
BLINCYTO ® 47 38 85 58 47%
Biosimilars** 81 92 173 19 *
Enbrel ® 1,323 43 1,366 1,292 6%
Neulasta ® 619 92 711 1,051 (32%)
NEUPOGEN ® 32 22 54 85 (36%)
EPOGEN ® 215 — 215 252 (15%)
Aranesp ® 204 248 452 477 (5%)
Sensipar ® /Mimpara ® 38 71 109 409 (73%)
Other*** 28 57 85 68 25%
Total product sales $ 4,029 $ 1,434 $ 5,463 $ 5,510 (1%)
* Change in excess of 100%
** Biosimilars includes KANJINTI™, AMGEVITA™ and MVASI™.
*** Other includes Bergamo, MN Pharma, IMLYGIC ® and Corlanor ® .
Operating Expense, Operating Margin and Tax Rate Analysis
On a GAAP basis:
On a non-GAAP basis:
$Millions, except percentages GAAP Non-GAAP
Q3'19 Q3'18 YOY Δ Q3'19 Q3'18 YOY Δ
Cost of Sales $ 1,036 $ 1,037 —% $ 760 $ 759 —%
% of product sales 19.0% 18.8% 0.2 pts. 13.9% 13.8% 0.1 pts.
Research & Development $ 1,001 $ 926 8% $ 977 $ 906 8%
% of product sales 18.3% 16.8% 1.5 pts. 17.9% 16.4% 1.5 pts.
Selling, General & Administrative $ 1,223 $ 1,293 (5%) $ 1,207 $ 1,268 (5%)
% of product sales 22.4% 23.5% (1.1) pts. 22.1% 23.0% (0.9) pts.
Other $ 1 $ 325 (100%) $ — $ — —%
Total Operating Expenses $ 3,261 $ 3,581 (9%) $ 2,944 $ 2,933 —%
Operating Margin
operating income as % of product sales 45.3% 42.2% 3.1 pts. 51.1% 53.9% (2.8) pts.
Tax Rate 13.6% 11.2% 2.4 pts. 15.2% 13.0% 2.2 pts.
pts: percentage points
Cash Flow and Balance Sheet
$Billions, except shares Q3'19 Q3'18 YOY Δ
Operating Cash Flow $ 3.4 $ 3.3 $ 0.1
Capital Expenditures 0.2 0.2 0.0
Free Cash Flow 3.2 3.1 0.1
Dividends Paid 0.9 0.9 0.0
Share Repurchase 1.2 1.7 (0.5)
Average Diluted Shares (millions) 602 649 (47)
Cash and Investments 20.9 29.9 (9.1)
Debt Outstanding 29.8 34.4 (4.6)
Stockholders' Equity 10.9 14.3 (3.4)
Note: Numbers may not add due to rounding
For the full year 2019, the Company now expects:
Third Quarter Product and Pipeline Update
The Company provided the following updates on selected product and pipeline programs:
ABP 798 (biosimilar rituximab)
Tezepelumab is being developed in collaboration with AstraZeneca PLC
EVENITY is developed in collaboration with UCB globally, as well as our joint venture partner Astellas in Japan
Rituxan is a registered trademark of Genentech
Non-GAAP Financial Measures
In this news release, management has presented its operating results for the third quarters of 2019 and 2018, in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2019 EPS and tax rate guidance in accordance with GAAP and on a non-GAAP basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the third quarters of 2019 and 2018. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP.
The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor's overall understanding of the financial performance and prospects for the future of the Company's ongoing business activities by facilitating comparisons of results of ongoing business operations among current, past and future periods. The Company believes that FCF provides a further measure of the Company's liquidity.
The Company uses the non-GAAP financial measures set forth in the news release in connection with its own budgeting and financial planning internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
Amgen is committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics. This approach begins by using tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.
Amgen focuses on areas of high unmet medical need and leverages its expertise to strive for solutions that improve health outcomes and dramatically improve people's lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world's leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.
Forward-Looking Statements
This news release contains forward-looking statements that are based on the current expectations and beliefs of Amgen. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including any statements on the outcome, benefits and synergies of the acquisition of Otezla, including anticipated Otezla sales growth and the timing of non-GAAP EPS accretion, as well as estimates of revenues, operating margins, capital expenditures, cash, other financial metrics, expected legal, arbitration, political, regulatory or clinical results or practices, customer and prescriber patterns or practices, reimbursement activities and outcomes and other such estimates and results. Forward-looking statements involve significant risks and uncertainties, including those discussed below and more fully described in the Securities and Exchange Commission reports filed by Amgen, including our most recent annual report on Form 10-K and any subsequent periodic reports on Form 10-Q and current reports on Form 8-K. Unless otherwise noted, Amgen is providing this information as of the date of this news release and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
No forward-looking statement can be guaranteed and actual results may differ materially from those we project. Our results may be affected by our ability to successfully market both new and existing products domestically and internationally, clinical and regulatory developments involving current and future products, sales growth of recently launched products, competition from other products including biosimilars, difficulties or delays in manufacturing our products and global economic conditions. In addition, sales of our products are affected by pricing pressure, political and public scrutiny and reimbursement policies imposed by third-party payers, including governments, private insurance plans and managed care providers and may be affected by regulatory, clinical and guideline developments and domestic and international trends toward managed care and healthcare cost containment. Furthermore, our research, testing, pricing, marketing and other operations are subject to extensive regulation by domestic and foreign government regulatory authorities. We or others could identify safety, side effects or manufacturing problems with our products, including our devices, after they are on the market. Our business may be impacted by government investigations, litigation and product liability claims. In addition, our business may be impacted by the adoption of new tax legislation or exposure to additional tax liabilities. If we fail to meet the compliance obligations in the corporate integrity agreement between us and the U.S. government, we could become subject to significant sanctions. Further, while we routinely obtain patents for our products and technology, the protection offered by our patents and patent applications may be challenged, invalidated or circumvented by our competitors, or we may fail to prevail in present and future intellectual property litigation. We perform a substantial amount of our commercial manufacturing activities at a few key facilities, including in Puerto Rico , and also depend on third parties for a portion of our manufacturing activities, and limits on supply may constrain sales of certain of our current products and product candidate development. We rely on collaborations with third parties for the development of some of our product candidates and for the commercialization and sales of some of our commercial products. In addition, we compete with other companies with respect to many of our marketed products as well as for the discovery and development of new products. Discovery or identification of new product candidates or development of new indications for existing products cannot be guaranteed and movement from concept to product is uncertain; consequently, there can be no guarantee that any particular product candidate or development of a new indication for an existing product will be successful and become a commercial product. Further, some raw materials, medical devices and component parts for our products are supplied by sole third-party suppliers. Certain of our distributors, customers and payers have substantial purchasing leverage in their dealings with us. The discovery of significant problems with a product similar to one of our products that implicate an entire class of products could have a material adverse effect on sales of the affected products and on our business and results of operations. Our efforts to acquire other companies or products and to integrate the operations of companies we have acquired may not be successful. A breakdown, cyberattack or information security breach could compromise the confidentiality, integrity and availability of our systems and our data. Our stock price is volatile and may be affected by a number of events. Our business performance could affect or limit the ability of our Board of Directors to declare a dividend or our ability to pay a dividend or repurchase our common stock. We may not be able to access the capital and credit markets on terms that are favorable to us, or at all.
CONTACT: Amgen, Thousand Oaks Trish Hawkins , 805-447-5631 (media) Arvind Sood , 805-447-1060 (investors)
Amgen Inc.
Consolidated Statements of Income - GAAP
(In millions, except per-share data)
(Unaudited)
Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
Revenues:
Product sales $ 5,463 $ 5,510 $ 16,323 $ 16,532
Other revenues 274 394 842 985
Total revenues 5,737 5,904 17,165 17,517
Operating expenses:
Cost of sales 1,036 1,037 3,103 3,005
Research and development 1,001 926 2,804 2,555
Selling, general and administrative 1,223 1,293 3,637 3,773
Other 1 325 (5) 303
Total operating expenses 3,261 3,581 9,539 9,636
Operating income 2,476 2,323 7,626 7,881
Interest expense, net 313 355 988 1,040
Interest and other income, net 114 126 517 519
Income before income taxes 2,277 2,094 7,155 7,360
Provision for income taxes 309 235 1,016 894
Net income $ 1,968 $ 1,859 $ 6,139 $ 6,466
Earnings per share:
Basic $ 3.29 $ 2.88 $ 10.08 $ 9.67
Diluted $ 3.27 $ 2.86 $ 10.01 $ 9.61
Weighted-average shares used in calculation of earnings per share:
Basic 599 645 609 669
Diluted 602 649 613 673
Amgen Inc.
Consolidated Balance Sheets - GAAP
(In millions)
September 30, December 31,
2019 2018
(Unaudited)
Assets
Current assets:
Cash, cash equivalents and marketable securities $ 20,853 $ 29,304
Trade receivables, net 3,606 3,580
Inventories 3,243 2,940
Other current assets 3,349 1,794
Total current assets 31,051 37,618
Property, plant and equipment, net 4,901 4,958
Intangible assets, net 6,702 7,443
Goodwill 14,705 14,699
Other assets 2,176 1,698
Total assets $ 59,535 $ 66,416
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 8,688 $ 9,069
Current portion of long-term debt 2,049 4,419
Total current liabilities 10,737 13,488
Long-term debt 27,742 29,510
Long-term deferred tax liabilities 665 864
Long-term tax liabilities 7,921 8,770
Other noncurrent liabilities 1,543 1,284
Total stockholders' equity 10,927 12,500
Total liabilities and stockholders' equity $ 59,535 $ 66,416
Shares outstanding 596 630
Amgen Inc.
GAAP to Non-GAAP Reconciliations
(Dollars in millions)
(Unaudited)
Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
GAAP cost of sales $ 1,036 $ 1,037 $ 3,103 $ 3,005
Adjustments to cost of sales:
Acquisition-related expenses (a) (276) (278) (828) (823)
Total adjustments to cost of sales (276) (278) (828) (823)
Non-GAAP cost of sales $ 760 $ 759 $ 2,275 $ 2,182
GAAP cost of sales as a percentage of product sales 19.0 % 18.8 % 19.0 % 18.2 %
Acquisition-related expenses (a) -5.1 -5.0 -5.1 -5.0
Non-GAAP cost of sales as a percentage of product sales 13.9 % 13.8 % 13.9 % 13.2 %
GAAP research and development expenses $ 1,001 $ 926 $ 2,804 $ 2,555
Adjustments to research and development expenses:
Acquisition-related expenses (a) (24) (19) (62) (59)
Certain net charges pursuant to our restructuring initiative — (1) — (1)
Total adjustments to research and development expenses (24) (20) (62) (60)
Non-GAAP research and development expenses $ 977 $ 906 $ 2,742 $ 2,495
GAAP research and development expenses as a percentage of product sales 18.3 % 16.8 % 17.2 % 15.5 %
Acquisition-related expenses (a) -0.4 -0.4 -0.4 -0.4
Certain net charges pursuant to our restructuring initiative 0.0 0.0 0.0 0.0
Non-GAAP research and development expenses as a percentage of product sales 17.9 % 16.4 % 16.8 % 15.1 %
GAAP selling, general and administrative expenses $ 1,223 $ 1,293 $ 3,637 $ 3,773
Adjustments to selling, general and administrative expenses:
Acquisition-related expenses (a) (17) (20) (26) (65)
Certain net charges pursuant to our restructuring initiative 1 (5) 1 (8)
Total adjustments to selling, general and administrative expenses (16) (25) (25) (73)
Non-GAAP selling, general and administrative expenses $ 1,207 $ 1,268 $ 3,612 $ 3,700
GAAP selling, general and administrative expenses as a percentage of product sales 22.4 % 23.5 % 22.3 % 22.8 %
Acquisition-related expenses (a) -0.3 -0.4 -0.2 -0.4
Certain net charges pursuant to our restructuring initiative 0.0 -0.1 0.0 0.0
Non-GAAP selling, general and administrative expenses as a percentage of product sales 22.1 % 23.0 % 22.1 % 22.4 %
GAAP operating expenses $ 3,261 $ 3,581 $ 9,539 $ 9,636
Adjustments to operating expenses:
Adjustments to cost of sales (276) (278) (828) (823)
Adjustments to research and development expenses (24) (20) (62) (60)
Adjustments to selling, general and administrative expenses (16) (25) (25) (73)
Certain net charges pursuant to our restructuring initiative — 2 2 8
Certain other expenses — — — (25)
Acquisition-related adjustments (b) (1) (327) 3 (286)
Total adjustments to operating expenses (317) (648) (910) (1,259)
Non-GAAP operating expenses $ 2,944 $ 2,933 $ 8,629 $ 8,377
GAAP operating income $ 2,476 $ 2,323 $ 7,626 $ 7,881
Adjustments to operating expenses 317 648 910 1,259
Non-GAAP operating income $ 2,793 $ 2,971 $ 8,536 $ 9,140
Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
GAAP operating income as a percentage of product sales 45.3 % 42.2 % 46.7 % 47.7 %
Adjustments to cost of sales 5.1 5.0 5.1 5.0
Adjustments to research and development expenses 0.4 0.4 0.4 0.4
Adjustments to selling, general and administrative expenses 0.3 0.5 0.2 0.4
Certain net charges pursuant to our restructuring initiative 0.0 -0.1 0.0 0.0
Certain other expenses 0.0 0.0 0.0 0.1
Acquisition-related adjustments (b) 0.0 5.9 -0.1 1.7
Non-GAAP operating income as a percentage of product sales 51.1 % 53.9 % 52.3 % 55.3 %
GAAP interest and other income, net $ 114 $ 126 $ 517 $ 519
Adjustments to other income (c) — 7 — (68)
Non-GAAP interest and other income, net $ 114 $ 133 $ 517 $ 451
GAAP income before income taxes $ 2,277 $ 2,094 $ 7,155 $ 7,360
Adjustments to operating expenses 317 648 910 1,259
Adjustments to other income (c) — 7 — (68)
Non-GAAP income before income taxes $ 2,594 $ 2,749 $ 8,065 $ 8,551
GAAP provision for income taxes $ 309 $ 235 $ 1,016 $ 894
Adjustments to provision for income taxes:
Income tax effect of the above adjustments (d) 92 147 230 285
Other income tax adjustments (e) (8) (25) (35) (15)
Total adjustments to provision for income taxes 84 122 195 270
Non-GAAP provision for income taxes $ 393 $ 357 $ 1,211 $ 1,164
GAAP tax as a percentage of income before taxes 13.6 % 11.2 % 14.2 % 12.1 %
Adjustments to provision for income taxes:
Income tax effect of the above adjustments (d) 1.9 2.7 1.2 1.7
Other income tax adjustments (e) -0.3 -0.9 -0.4 -0.2
Total adjustments to provision for income taxes 1.6 1.8 0.8 1.5
Non-GAAP tax as a percentage of income before taxes 15.2 % 13.0 % 15.0 % 13.6 %
GAAP net income $ 1,968 $ 1,859 $ 6,139 $ 6,466
Adjustments to net income:
Adjustments to income before income taxes, net of the income tax effect 225 508 680 906
Other income tax adjustments (e) 8 25 35 15
Total adjustments to net income 233 533 715 921
Non-GAAP net income $ 2,201 $ 2,392 $ 6,854 $ 7,387
Amgen Inc.
GAAP to Non-GAAP Reconciliations
(In millions, except per-share data)
(Unaudited)
The following table presents the computations for GAAP and non-GAAP diluted earnings per share:
Three months ended September 30, 2019 Three months ended September 30, 2018
GAAP Non-GAAP GAAP Non-GAAP
Net income $ 1,968 $ 2,201 $ 1,859 $ 2,392
Weighted-average shares for diluted EPS 602 602 649 649
Diluted EPS $ 3.27 $ 3.66 $ 2.86 $ 3.69
Nine months ended September 30, 2019 Nine months ended September 30, 2018
GAAP Non-GAAP GAAP Non-GAAP
Net income $ 6,139 $ 6,854 $ 6,466 $ 7,387
Weighted-average shares for diluted EPS 613 613 673 673
Diluted EPS $ 10.01 $ 11.18 $ 9.61 $ 10.98
(a) The adjustments related primarily to noncash amortization of intangible assets acquired in business combinations.
(b) For the three and nine months ended September 30, 2018, the adjustments related primarily to an impairment charge associated with a nonkey in-process research and development asset.
(c) For the nine months ended September 30, 2018, the adjustment related to the net gain associated with the Kirin-Amgen, Inc., share acquisition.
(d) The tax effect of the adjustments between our GAAP and non-GAAP results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact at the U.S. marginal tax rate for certain adjustments, including the majority of amortization of intangible assets, whereas the tax impact of other adjustments, including restructuring expense, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable tax rate(s) in those jurisdictions. Due to these factors, the effective tax rates for the adjustments to our GAAP income before income taxes, for the three and nine months ended September 30, 2019, were 29.0% and 25.3%, compared with 22.4% and 23.9% for the corresponding periods of the prior year.
(e) The adjustments related primarily to certain acquisition items and prior-period items excluded from GAAP earnings.
Amgen Inc.
Reconciliations of Cash Flows
(In millions)
(Unaudited)
Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
Net cash provided by operating activities $ 3,377 $ 3,273 $ 6,636 $ 8,102
Net cash provided by investing activities 5,372 1,132 11,672 18,976
Net cash used in financing activities (2,859) (2,580) (13,838) (18,922)
Increase in cash and cash equivalents 5,890 1,825 4,470 8,156
Cash and cash equivalents at beginning of period 5,525 10,131 6,945 3,800
Cash and cash equivalents at end of period $ 11,415 $ 11,956 $ 11,415 $ 11,956
Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
Net cash provided by operating activities $ 3,377 $ 3,273 $ 6,636 $ 8,102
Capital expenditures (170) (171) (430) (513)
Free cash flow $ 3,207 $ 3,102 $ 6,206 $ 7,589
Amgen Inc.
Reconciliation of GAAP EPS Guidance to Non-GAAP
EPS Guidance for the Year Ending December 31, 2019
(Unaudited)
GAAP diluted EPS guidance $12.50 — $12.80
Known adjustment to arrive at non-GAAP*:
Acquisition-related expenses (a) (b) 1.59 — 1.64
Tax adjustments 0.06
Non-GAAP diluted EPS guidance $14.20 — $14.45
* The known adjustments are presented net of their related tax impact, which amount to approximately $0.39 to $0.40 per share.
(a) The adjustments relate primarily to noncash amortization of intangible assets acquired in business combinations.
(b) The adjustments exclude transactions that have not yet closed.
Our GAAP diluted EPS guidance does not include the effect of GAAP adjustments triggered by events that may occur subsequent to this press release such as acquisitions, asset impairments, litigation and changes in the fair value or our contingent consideration.
Reconciliation of GAAP Tax Rate Guidance to Non-GAAP
Tax Rate Guidance for the Year Ending December 31, 2019
(Unaudited)
GAAP tax rate guidance 13% — 14%
Tax rate of known adjustments discussed above 1%
Non-GAAP diluted EPS guidance 14% — 15%

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Last updated: Oct 29, 2019