(Updates throughout with details, company comment.) By Thomas Gryta Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Amgen Inc. (AMGN) reported a 5.3% drop in second-quarter net income, as total sales of its products dropped and spending rose in preparation of a key product launch. The Thousand Oaks, Calif., drug maker's results exceeded analyst expectations for both profit and revenue, which was boosted by payments from overseas partners. The company lowered its 2010 revenue projection because of weakness in the euro's value against the dollar. Product sales of the quarter dropped by 1%, but Wall Street's focus has been on the company's recent launch of osteoporosis drug Prolia, which was approved in late May in Europe and June 1 in the U.S. The effort is Amgen's first at selling a product to general-practice physicians and it has had to build a suitable sales force to do it. Selling, general and administrative costs rose 9% to $968 million, primary from efforts around the launch, and the company expects that growth to continue as it supports Prolia. "It is early days, but so far so good," said Chief Executive Kevin Sharer on a conference call Thursday. The sales of the drug were immaterial for the latest quarter, coming in at only $3 million, but the drug is important to the future growth of Amgen. Lazard Capital Markets currently projects worldwide sales to exceed $1 billion next year. Amgen has teamed with GlaxoSmithKline Plc. (GSK, GSK.LN) to sell the drug in Europe. The company said that it is still working through the process of getting U.S. insurers to pay for the product. In Germany, where physicians are already free to prescribe Prolia as they see fit, Amgen said it is seeing "very nice uptake". The company is expecting to get reimbursement authorization and launch in Spain and France in early 2011. It is continuing to pursue approvals around the world, including expected approval in Canada and Switzerland in the third quarter, and more than 30 other application in collaboration with GlaxoSmithKline. Amgen has filed for the drug's U.S. approval, at a much higher dose, in helping prevent bone complications in cancer patients. The Food and Drug Administration's decision on that is expected by November. Data are expected in the fourth quarter to show whether it prevents prostate cancer from spreading to the bone. The company now expects full-year revenue to come in "slightly below" $15.1 billion, citing the euro. It has previously projected $15.1 billion to $15.5 billion and analysts estimated $15.08 billion, according to Thomson Reuters. The company continues to expect U.S. healthcare reform to hit 2010 revenue by $200 million to $250 million. Because of its hedging program, which minimizes the impact of currency swings on its profits, Amgen still expects 2010 adjusted earnings to be at the lower end of $5.05 to $5.25, compared to Wall Street expectations of $5.12. For the three months ended June 30, Amgen reported net income of $1.2 billion, or $1.25 a share, down from earnings of $1.27 billion, or $1.25 a share, a year ago. Excluding items, earnings were $1.380 a share, well above a Wall Street estimate of $1.30. In the quarter, Amgen repurchased about 10 million shares for $600 million, which follows buying back $1.7 billion worth of shares in the previous quarter. Revenue in the quarter rose 2.5% to $3.8 billion, below the average Street estimate of $3.74 billion. Revenue was lifted by a $75 million payment from GlaxoSmithKline related to the Prolia collaboration, and a $45 million payment from Takeda Pharmaceutical Co. Ltd. (4502.TO) related to its Japan collaboration on cancer drug Vectibix. Sales of anemia treatment Aranesp fell 13% to $603 million in the quarter, and fell short of a Wall Street consensus estimate of $633 million, according to MDRx Financial. The drop came from a decline in worldwide demand for the drug. Sales of Epogen, an earlier version of Aranesp, rose 3% to $657 million, slightly above expectations. Earlier this week, the Centers for Medicare and Medicaid Services, or CMS, unveiled rules that will begin to change its reimbursement of kidney dialysis drugs and services next year. The shift is expected to reduce use of Amgen's anemia drugs, which are one of Medicare's largest drug-based costs. Currently, dialysis is reimbursed separately from the drugs used in the process, but the changes will mean that a flat price is paid for everything. That means doctors who previously were able to profit from the use of the anemia drugs will now be encouraged to use less of them. Sharer said that it is "really early" to predict the ultimate effects of the rules on Amgen, but he said that the general guidelines are within the company's expectations. Combined first-quarter sales of Neulasta and Neupogen, used to prevent infections in patients receiving chemotherapy, rose 1% to $1.17 billion. Sales of Enbrel--sold in North America by Amgen and distributed elsewhere by Pfizer Inc. (PFE)--were down 2% to $877 million for the quarter. The drop came primarily from lost market share. Enbrel, launched in 1998, is part of an increasingly crowded field of anti-inflammatory treatments and has been losing market share for years. -By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com (END) Dow Jones Newswires July 29, 2010 18:58 ET (22:58 GMT)
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