Interpreting Amgen Sales From J&J’s PROCRIT (AMGN, JNJ)

October 16, 2007 by Douglas A. McIntyre

Shares of Amgen Inc. (NASDAQ:AMGN) are under bit of pressure this morning, although not from any direct news from the company itself.  Luckily for Amgen, much of the bad news may already be baked into the biotech cake.  Genentech’s slightly soft top-line results aren’t a great development for biotechs in general, but the real issue may revolve around competitor (actually, its sales partner) anemia drug sales out of Johnson & Johnson (NYSE:JNJ).  J&J and Amgen have been feeling sales pressures since their anemia drugs came under fire and have had to carry a black box warning label.

J&J said in its drug unit that growth was impacted by lower sales of anemia drug PROCRIT, primarily due to a decline in the market related to a labeling change made this past March and a decision memorandum issued by the Centers for Medicare & Medicaid Services under its national coverage analysis process.  J&J licenses PROCRIT from Amgen.  If you review the sales of this in J&J’s release, PROCRIT sales in the U.S. were down year over year by 27% to $380 million (from $522 million), although international PROCRIT sales rose 9% to $302 million.  Total PROCRIT sales were down 14.6% to $682 million.

The good news is that this was mostly a known event, at both companies.  Wall Street has systematically trimmed earnings and revenue projections for Amgen throughout 2007.  The key difference in these companies is that Amgen is much more dependent upon on anemia drug sales for about half of its sales, whereas J&J’s 5% exposure to anemia sales is relatively just a line-item on a long-term basis.

We’ll find out Amgen’s earnings on October 24: analysts are looking for total revenues of $3.56 Billion (down from $3.612 Billion in Q3 2006).  We’ll follow up with a more detailed Amgen preview using some of these interpolations for the bigger picture ahead of its earnings release.  Amgen shares are only down 0.2% at $57.55, and the 52-week trading range is $48.30 to $77.00.  In late 2005, Amgen traded over $80.00. 

Jon C. Ogg
October 16, 2007