(1) Briefly summarize Amgen’s Strategy and financial expectations (See Part B below) as articulated in the CEO’s Letter to Shareholders (maximum 3 paragraphs).
Amgen’s business is discovering, developing, and delivering medicines that address significant unmet needs for patients with serious diseases. The company invests in R&D to develop medicine – this is a risky business. The strategy centers on advancing innovative medicines and a portfolio of biosimilar medicines, all addressing serious illness. The core of the strategy is that innovative, highly-differentiated medicines that provide large clinical benefits in addressing serious diseases are medicines that will not only help patients, but also will help reduce the social and economic burden of disease in society today.
To earn a return on the investment in innovation, the company must execute well on initiatives that capture the value of these innovations for patients. These initiatives include expanding geographic reach, continuing to lead in high-quality manufacturing by transitioning to next-generation technologies, continuing to improving biologic drug delivery systems, and pursuing disciplined business development.
The company is focused on extracting as much value from its R&D investments as possible. It maximizes this value by focusing on biosimilar medicines, improved delivery systems, etc. It appears that the company has slowed R&D investment in recent years and is beginning to “harvest” some of its investments by realizing sales. Operating margins have improved substantially in 2016 due primarily to increased gross margin and reduced R&D expenses. Bradway’s letter to shareholders suggests that this trend is likely to continue in 2017.
(2) What are total revenues for Amgen for 2016, 2015, & 2014?
2016: $22,991, 2015: $21,662, 2014: $20,063
(3) What was the growth rate for total revenues from 2015-2016 and 2014-2015?
2015-2016: 6.1%, 2014-2015: 8.0%
(4) Describe any differences that you detect over the three-year period 2016-2014.
The total revenues grew by roughly $1 Billion dollars each year.
(5) What is R&D for Amgen for 2016, 2015, & 2014?
2016: $3,840, 2015: $4,070, 2014: $4,297
(6) What was the growth rates for R&D for 2015-2016 and 2014-2015?
2016 R&D growth was negative, which means Amgen spent less on R&D -5.7% ($230)
2015 R&D growth was negative, which means Amgen spent less on R&D -5.3% ($227)
(7) What was net income (Earnings) for Amgen for 2016, 2015, & 2014?
2016: $7,722, 2015: $6,939, 2014: $5,158
(8) What was the growth rate in net income for Amgen from 2015-2016 and 2014-2015?
2016 net income growth was 11.3%, $783
2015 net income growth was 34.5%, $1781
(9) Compare and contrast the growth of total revenue with the growth in net income (earnings)?
In 2016, net revenue grew by 6.14% ($1.33B approx) while net income grew by 11.3%, $783M
In 2015, net revenue grew by 8% ($1.6B) roughly while net income grew by 34.5% ($1.8B)