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Amgen (AMGN)
Amgen's Q3 Profit Jumps 14 percent
Shares of Amgen, the world's largest biotechnology company, were up Tuesday morning due to earnings results that came in well above analysts' estimates. The results, released after the market close on Monday afternoon, showed that Amgen's profit for the third quarter increased by 14 percent. Amgen managed to increase profits despite ramping up their spending on research. The surge in profits has been attributed to a double digit increase in sales for their leading product, Aranesp, an anemia treatment. Investors had been concerned about whether Amgen would continue to bring in the profits they've seen in the past as their patents start to expire and due to legal tangles involving their competitors. The results for the third quarter were solid, but what does Amgen's future look like?
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Amgen's third quarter earnings came in at $1.1 billion, or 94 cents a share, as compared to $967 million, or 77 cents a share, in the year-ago period. Revenues increased by 15 percent, from $3.15 billion, to $3.61 billion. Sales of Aranesp ramped up by 27 percent, raking in $1.07 billion in the third quarter. The increase in profits came despite a sizeable increase in costs associated with research and development. Research costs in the third quarter last year were $559 million, this year they were $835 million. Amgen's CEO, Kevin Sharer, said "Every company in our business has to continually invest in their own future," in an interview with The Associated Press. He went on to say, "We have some big patents that are going to expire in the U.S. and we want to be ready for that."
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This year, Amgen started running nine large scale human trials, in hopes that the research will eventually boost sales for existing products as well lead to the development of new drugs. Amgen has several patents that will expire within 7 to 10 years, and hopefully new drugs would be able to take their place. In the meantime though, Amgen is in the midst of legal complications with their competitors. Amgen has a suit against Roche Holdings Ltd., arguing that Roche's plans to launch their own anemia drug will infringe on existing patents for Amgen's Aranesp and another anemia drug, Epogen. Roche has argued that their product is made differently from Amgen and doesn't violate any patents and requested that the case be thrown out. Last week, a federal judge in Boston refused to grant that request. In their other legal battle, Amgen is facing an antitrust lawsuit brought on by Johnson & Johnson. The lawsuit is related to Amgen's bundling of Neulasta, their drug for fighting infections, along with a discount on Aranesp.
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While Amgen's results for the third quarter were mostly positive, the positive results weren't universal to all of the companies drugs. Sales of Enbrel, a drug for rheumatoid arthritis, were largely disappointing, growing just over 5 percent to $705 million, while analysts had been expecting a growth of 20 percent. George Morrow, Amgen's executive vice president, said "Enbrel is not meeting our expectations despite considerable effort." That said though, Enbrel seems to be the exception to the rule, and most of Amgen's other drugs are performing well. Things look like they will continue to go well for Amgen if their legal battles end in their favor, and if their ramped up research operations end up providing results which can buffer the impact of expiring patents.
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Profile |
The Company's principal activities are to discover, develop, manufacture and market human therapeutics based on advances in cellular and molecular biology. The Company markets human therapeutic products in the areas of hematology, oncology, and inflammation. The Company's key products include EPOGEN(R), Aranesp(R), Neulasta(R), NEUPOGEN(R), ENBREL(R). EPOGEN(R) and Aranesp(R) stimulate the production of red blood cells, for the treatment of anemia associated with chronic renal failure. Neulasta(R) and NEUPOGEN(R) selectively stimulate the production of neutrophils, one type of white blood cell, for treatment of infection in-patients undergoing myelosuppressive chemotherapy. ENBREL(R) blocks the biologic activity of tumor necrosis factor, which is used for treating patients with active rheumatoid arthritis. The Company's other products include Kineret(R) and Stemgen(R). It maintains a sales and marketing force in the United States, Europe, Canada, Australia, and New Zealand.
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