Amgen Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless stated otherwise. Amgen is a global biotechnology company operating in one segment: human therapeutics. Figures below are in U.S. dollars; financial statement amounts are in millions unless otherwise noted.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $6.238 billion | $5.901 billion; up 6% |
| Product sales | $5.731 billion | $5.592 billion; up 2% |
| Operating income | $2.500 billion | $2.129 billion; up 17% |
| Net income | $1.476 billion | $1.646 billion; down 10% |
| Diluted EPS | $2.68 | $2.83; down 5% |
| Operating margin | 40.1% | 36.1% (calculated as operating income divided by revenue) |
| Cash provided by operating activities | $2.164 billion | $2.104 billion |
| Cash, cash equivalents and marketable securities | $6.544 billion at March 31 | $8.037 billion at December 31, 2021 |
| Total debt carrying value | $36.854 billion | $33.309 billion at December 31, 2021 |
Current assets were $18.520 billion and current liabilities $12.886 billion at quarter-end. Cash declined by $1.461 billion during the quarter. Financing cash outflow was $3.514 billion, primarily reflecting $6.360 billion of share repurchases and $1.080 billion of dividends, partly offset by $3.952 billion of net debt proceeds. Capital expenditures were $190 million; management estimated 2022 capital-project spending of approximately $950 million.
Material changes and drivers
- Revenue growth reflected higher product demand and favorable changes to estimated sales deductions, alongside $507 million of other revenue, principally from sales of COVID-19 antibody material.
- Product-sales growth was led by Repatha (+15%), Prolia (+12%), Nplate (+17%) and KYPROLIS (+14%). Neulasta fell 28%, ENBREL 7%, and Otezla 5%. Management cited competitive price pressure, biosimilar competition, demand and inventory changes among product-specific drivers.
- Operating expenses declined 1% to $3.738 billion. Cost of sales increased 5%; R&D declined 1% and SG&A declined 2%. Cost of sales was 25.0% of revenue versus 25.2% a year earlier.
- Despite higher operating income, net income fell, primarily as other expense, net, moved to $530 million of expense from $13 million of income. Amgen cited losses on strategic equity investments, including losses from limited partnership investments and its Neumora investment.
- Amgen issued $4.0 billion of debt during the quarter. It repurchased 24.6 million shares; the $6.0 billion accelerated share repurchase remained subject to final settlement scheduled for Q3 2022. The board declared a quarterly dividend of $1.94 per share.
Outlook, commentary and risks
- Management said existing funds, operating cash generation and financing access should be adequate for working capital, capital spending, debt service, planned dividends and repurchases, and other strategic initiatives. The filing does not provide clear full-year revenue or EPS guidance in the supplied text.
- Management expected portfolio-level net selling prices to continue declining during the rest of 2022 because of increased competition, and operating expenses to be higher in the remaining quarters as investment in innovation and long-term growth continues.
- COVID-19 continued to affect healthcare capacity and patient visits; cumulative pandemic-related declines in diagnoses remain a drag on new treatment starts. Management noted recent improvement in provider and patient activity but cautioned that demand may remain variable.
- Significant tax exposure remains disputed. IRS notices for 2010–2012 seek approximately $3.6 billion of additional federal tax plus interest; an April 2022 notice for 2013–2015 seeks approximately $5.1 billion plus interest and asserts approximately $2.0 billion in penalties. Previously accrued repatriation tax could reduce amounts due. Amgen disputes the IRS positions and says final resolution is unlikely within 12 months; outcomes could exceed accrued liabilities.
- Other risks include biosimilar and generic competition, litigation and patent disputes, changing U.S. and international tax rules, geopolitical and sanctions-related uncertainty, COVID-19 effects, and foreign-exchange and LIBOR transition exposure. Management reported disclosure controls were effective as of March 31, 2022.
Important facts for investors to verify
- Whether product demand, pricing and competitive pressures support sustained revenue growth, particularly for products facing biosimilar competition.
- How strategic investment losses and other nonoperating items affect earnings beyond Q1.
- Progress and potential financial outcomes of the IRS disputes, including the asserted tax, interest and penalty amounts and available offsets.
- Final share count and any cash or share adjustment when the $6.0 billion accelerated repurchase settles in Q3 2022.
- Debt levels, liquidity and capital returns relative to management’s planned capital investment and strategic spending.