Amgen 4Q profit drops 16 pct. on higher spending

Drugmaker Amgen Inc. on Wednesday posted a 16 percent drop in fourth-quarter profit, as higher costs for production, marketing, research and other items offset higher sales for many of its biologic medicines. The results fell a bit short of Wall Street expectations.

The world’s biggest biotech company, based in Thousand Oaks, Calif., said net income was $788 million, or $1.01 per share, for the three months ended Dec. 31. That was down from $934 million, or $1.08 per share, a year earlier.

Excluding one-time items, net income would have been $1.40 per share. That’s 4 cents less than analysts expected, on average, according to research provider FactSet.

In after-hours trading, Amgen shares fell 24 cents to $82.83. They had fallen 22 cents in the regular session before the results were released.

The maker of anemia treatments Aranesp and Epogen said revenue rose 11 percent to $4.42 billion. Analysts predicted sales of $4.37 billion.

“Overall, I would say it was a fine quarter,” Edward Jones analyst Judson Clark said. “It was not remarkable.”

Clark said the higher expenses generally seemed “legitimate,” such as a 9 percent jump in spending on research and development as a half-dozen experimental drugs are in, or about to start, expensive late-stage patient testing.

Company executives told analysts on a conference call that they have increased ads targeting consumers for some existing medicines, or plan to do so.

Amgen also has increased the sales force for immune disorder treatment Enbrel, one of its top money makers. A partnership, under which Amgen sells the drug in the U.S. and Pfizer Inc. sells it in other countries, is going to wind down, with Amgen likely handling all the marketing eventually. Clark said Pfizer is switching its focus to its own, competing drug, Xeljanz, which was approved for treating rheumatoid arthritis in November.

In addition, Amgen last month agreed to pay $762 million to resolve federal criminal and civil liability over its marketing of some drugs for unapproved uses.

“We ended 2012 with momentum, really across our products and geographies,” Amgen CEO Robert A. Bradway told the analysts. “Our European business continued to grow despite tough economic conditions.”

Amgen’s sales were led by Enbrel, up 23 percent from the 2011 quarter to $1.16 billion, and Neulasta and Neupogen for fighting infection in cancer patients. They had a combined $1.31 billion in sales, down 1 percent.

Sales of Aranesp and Epogen fell 9 percent and 1 percent, respectively, to a combined $968 million.

Several newer drugs had double-digit jumps in revenue, including Prolia for osteoporosis, Xgeva for preventing fractures in cancerous bones and Sensipar for excessive calcium levels and a thyroid disorder.

However, Amgen noted it had raised prices on several drugs, which boosted revenue.

Chief Financial Officer Jonathan Peacock said Amgen, having just wrapped up a $10 billion share repurchase program and authorized another $2 billion in share buybacks, will now shift its strategy for rewarding shareholders.

“Over the next few years, our share repurchases will moderate,” he said, with more focus on dividends. Amgen’s board recently increased its quarterly dividend by 31 percent, to 47 cents a share.

The company expects 2013 earnings per share of $6.85 to $7.15. That brackets the average prediction of analysts for $7 per share.

Amgen predicted 2013 revenue will fall between $17.8 billion to $18.2 billion, compared with Wall Street’s forecast for sales of $17.75 billion.

“We’re on track to hit the upper end of our (prior) 2015 revenue guidance two years early,” Peacock noted.

For the full year, net income was $4.35 billion, or $5.52 per share. That was up from $3.68 billion, or $4.04 per share, in 2011. The 2012 per-share results got a significant boost from a sharp reduction in the number of outstanding shares.

Revenue rose 11 percent in 2012, to $17.27 billion from $15.58 billion.