A concise overview of Amgen's (AMGN) current situation, post 1Q09 results.
Summary
Amgen shares trade at a historically cheap trailing PE due to market concerns that key blockbuster drugs are seeing revenue declines and that Amgen’s pipeline is not sufficient to provide significant long term earnings growth.
In the most recent quarter, Amgen reported adjusted EPS of $1.08, down 4% YoY. Adjusted net income was down 8% and total revenue down 8% YoY as well. Nevertheless, an analysis of Amgen’s earnings call reveals that the company’s 8% revenue decline was not as bad as it might look on a first pass. One off factors such as a change in sales model for Amgen’s key product Enbrel, which benefitted last year’s revenue number by $120m, the divestiture of three drugs which had generated $200m, and a $69m forex effects caused the entire apparent decline. Adjusting out these factors would result in an adjusted revenue growth, rather than decline, of 3% YoY. Op expenses were down 10% due to tight cost control.
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