Industry Trend Analysis - Transition Away From Legacy Products On Track - SEPT 2017


BMI View: Amgen's Q217 financial results highlight the firm's transition away from over-reliance on its legacy products , which are facing increasing competition and losing market share. The firm's revenue growth over both the short and long term will be reliant on the continued uptake of its new portfolio of products, with Repatha anticipated to produce blockbuster-level revenues.

Amgen's Q217 financial results reflect the firm's success at transitioning from its legacy products to its new growth portfolio. The company posted a rise in revenues of 2.1% year-on-year (y-o-y) to USD5.81, while an increase in its margins resulted in an increase in income of 15.0%. The firm upgraded its bottom line full-year earnings per share (EPS) guidance from USD12.00-12.60 to USD12.15-12.65, while full-year revenue guidance was consolidated from USD22.3-23.1 to USD22.5-23.0, indicating that the firm anticipates a continuation of the current sales environment.

Amgen remains reliant on its 20th-century blockbuster drugs, in particular Neulasta (pegfilgrastim) and Enbrel (etanercept), which together account for over 45% of total product sales. These legacy products are facing an increasingly competitive environment, leading to declining market shares. Sales of Enbrel fell by 1.2% y-o-y due to lower unit demand, which was partially offset by changing list prices. Ne ulasta revenues shrank by 5.4% y-o-y, also due to falling unit demand. We note that a number of drugmakers have sought to develop a biosimilar version of Neulasta, including Sandoz, Novartis, Mylan/ Biocom, Apotex, Coherus Biosciences and Cinfa, which will lead to further erosion of market share when these are approved. Posing upside to Amgen's revenues in the short term, the US Food and Drug Administration (FDA) has yet to approve any of these competitors, with both Novartis and Coherus facing rejections to their applications over the past 12 months.

Steady Revenues Despite Competition
Amgen Financial Snapshot (USDbn)
Source: Amgen, BMI

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