Amgen 1Q profit falls 4 percent on higher costs

Amgen Inc., the world's biggest biotech company, said Wednesday that its first-quarter profit fell about 4 percent as it boosted spending on the launch of bone drugs Prolia and Xgeva and late-stage drug research. But results still topped Wall Street expectations and the company reaffirmed its outlook for the year.

Amgen said sales of new drug Xgeva, which is used to prevent bone fractures in patients with cancer that has spread to the bone, are off to a "strong start" with $42 million in revenue in the first full quarter since its launch. The drug is also sold under the name Prolia as a treatment for osteoporosis in postmenopausal women, for which it had $27 million in sales.

The company, which makes also makes cancer and anemia drugs, earned nearly $1.13 billion, or $1.20 per share, in the latest period. That's down from $1.17 billion, or $1.18 per share, during the same period a year earlier. Per-share results increased in the latest quarter because the company cut its outstanding shares by 47 million.

Excluding charges, the company said it earned $1.34 per share, topping the $1.29 per share expected by analysts polled by FactSet.

Revenue rose 3 percent to $3.71 billion from $3.59 billion, also beating analysts' $3.68 billion forecast. Combined sales of Neulasta and Neupogen, which are used to prevent infections in chemotherapy patients, increased 4 percent to $1.23 billion. That helped offset the continued decline in sales of the company's anemia drugs in the wake of safety warnings and tighter restrictions on their use. Aranesp sales fell 7 percent to $250 million while Epogen sales fell 14 percent to $535 million.

Operating expenses jumped 14 percent to $2.41 billion, on a mix of product costs. The largest boost came from selling and general expenses as the company continues promoting its new bone-drugs. In addition, Amgen said it spent more on late-stage development of new products. Overall, the two items added about $130 million in additional costs.

"This increase is unusual for Amgen, which has been and remains disciplined about having revenues lead expenses," said Chairman and CEO Kevin Sharer, in a conference call on Wednesday.

"2011 is an investment year for Amgen," he said.

The company also booked excise taxes related to health care reform and about $60 million in profit-sharing costs for the rheumatoid arthritis and psoriasis drug Enbrel.

Looking ahead, the Thousand Oaks, Calif.-based company expects full-year adjusted profit between $5 and $5.20 per share on $15.1 billion to $15.5 billion in revenue. Analysts expect $5.15 per share in profit on $15.26 billion in revenue, on average.

The company said it still expects the total impact of healthcare reform in 2011 to range between $400 million and $500 million, including a federal excise fee of $150 million to $200 million.

Shares of Amgen's stock closed up $1 at $56.18 before the report. They slid $1.22, or 2.2 percent, to $55 in aftermarket trading.

Citi analyst Yaron Werber called the results "mixed," with lower demand and Medicare's practice of bundling payments for doctors and hospitals hurting the company's anemia franchise. But he said the key will be Amgen's business update on Thursday in which Werber expects the company to announce a dividend hike and give an update on its product pipeline.

In a note to clients he said Xgeva sales were more than double what he expected, though Prolia sales came in a bit shy of his $31 million estimate.