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Amgen is the latest to raise drug prices despite public outcry
MARKETWATCH 10:16 AM ET 7/28/2016
Symbol Last Price Change
AMGN 167.51up -3.17 (-1.86%)
QUOTES AS OF 10:17:08 AM ET 07/28/2016
Drug price hikes may not make for a sustainable model, says J.P. Morgan

Amgen Inc.'s (AMGN) second quarter was a solid one with promising potential: earnings and revenue met expectations, and the company increased its 2016 guidance for both measures.

But the numbers were bolstered by Increased prices on many of the company's drugs, with Amgen(AMGN) joining several (http://www.marketwatch.com/story/mylans-epipen-price-increases-are-valeant-like-in-size-shkreli-like-in-approach-2016- 07-20)other pharmaceutical companies in raising prices despite public outcry on the subject.

On the company's earnings call, Executive Vice President Anthony Hooper said that drug prices are based on marketplace value and the competitive landscape.

Increases for blockbuster biologic Enbrel, which competes with other anti-inflammatory drugs such as AbbVie Inc.'s (ABBV) Humira and Johnson & Johnson's (JNJ) Remicade, were necessary given the "highly competitive marketplace (http:// www.marketwatch.com/story/these-new-drugs-might-never-get-a-chance-to-save-the-us-250-billion-2016-07-20)," Hooper said.

Drug prices get negotiated down (http://www.marketwatch.com/story/this-health-care-player-youve-never-heard-of-is- acting-aggressively-to-keep-costs-down-2016-06-21) to get placed on formularies, or lists of drugs covered by health plans. "Because of the magnitude of these rebates, price increases have become part of the competitive dynamic," he said.

See more: This health care player you've never heard of is acting 'aggressively' to keep costs down (http:// www.marketwatch.com/story/this-health-care-player-youve-never-heard-of-is-acting-aggressively-to-keep-costs-down-2016- 06-21)

Sales of Enbrel rose because of price increases, which offset a decline in market share, the company said in an investor presentation. Price increases also boosted sales of thyroid treatment Sensipar, and to a lesser extent, cancer treatment Xgeva.

Price increases also helped partially offset a year over year sales decline for biologic drug Neulasta, which prevents infection after chemotherapy, the presentation said.

Amgen (AMGN) noted that growth in "net selling price" includes changes in list prices--which don't include often significant discounts on drugs for the insured--and "contracting and access changes."

The role of price increases in Amgen's(AMGN) second-quarter results caused J.P. Morgan analysts to question the "quality on the revenue line."

"We question the sustainability of the liberal price increases that span across the commercial portfolio in the face of growing industry criticism," analyst Cory Kasimov said. "Discounts and rebates can have a meaningful effect on the net effective price, but the strategy has clearly been a boost to AMGN numbers."

Related: Why Amgen's positive biosimilar news isn't as good as it seems (http://www.marketwatch.com/story/why-amgens- positive-biosimilar-news-isnt-as-good-as-it-seems-2016-07-13)

(http://www.marketwatch.com/story/why-amgens-positive-biosimilar-news-isnt-as-good-as-it-seems-2016-07-13)

(https://w.graphiq.com/w/idE8LVeCfrf)

For many of Amgen's(AMGN) drugs, the competitive landscape has been changing due to a new class of drugs called biosimilars, which, though slow to get to market (http://www.marketwatch.com/story/these-new-drugs-might-never-get-a-chance-to-save- the-us-250-billion-2016-07-20), could introduce significant cost savings on expensive drugs.

Amgen's (AMGN) Enbrel, Neulasta and Neupogen, which prevents infection after chemotherapy, in particular face impending competition from biosimilars. At least 11 biosimilar copies are in development (http://www.marketwatch.com/story/these- new-drugs-might-never-get-a-chance-to-save-the-us-250-billion-2016-07-20)for both Neulasta and Neupogen, with Novartis AG's (NOVN.EB) Zarxio--a Neupogen competitor--the first biosimilar approved and sold in the U.S. A biosimilar copy of Enbrel, also by Novartis, was recommended (http://www.marketwatch.com/story/fda-committee-supports-approval-of-sandoz- biosimilar-for-amgens-blockbuster-enbrel-2016-07-14)for approval in mid-July.

Amgen (AMGN) has also been developing biosimilars, including a replica (http://www.marketwatch.com/story/why-amgens-positive- biosimilar-news-isnt-as-good-as-it-seems-2016-07-13) of blockbuster rival drug Humira.

Read more: These drugs could cut American health costs by $250 billion (if only we could take them) (http:// www.marketwatch.com/story/these-new-drugs-might-never-get-a-chance-to-save-the-us-250-billion-2016-07-20)

Amgen's (AMGN) second-quarter earnings rose to $1.87 billion, or $2.47 per share, from $1.65 billion, or $2.15 per share in the year-earlier period. Revenue was $5.69 billion, matching the FactSet consensus. Adjusted EPS was $2.84, in-line with the FactSet consensus.

Amgen (AMGN) shares have risen 5.7% over the last three months, compared with a 4.3% rise in the S&P 500 index .

-Emma Court; 415-439-6400; [e-mail]


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07-28-161016ET
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