Business life: My finance news blog

Biotech Amgen on Thursday reported an increase in earnings and a decrease in sales for the fourth quarter, beating Wall Street’s forecast.

Amgen (AMGN, Fortune 500), based in Thousand Oaks, Calif., said its adjusted net profit rose 3 percent to nearly $1.1 billion, or $1 per share. Quarterly sales slipped 2 percent to $3.7 billion.

Analysts had forecast earnings of 97 cents per share without charges, and an 8 percent decline in sales to $3.5 billion, according to Thomson One Analytics.

Amgen also said that a late-stage study showed that its experimental drug denosumab was 40 percent more effective in treating bone disease than Fosamax, from its potential competitor, Merck (MRK, Fortune 500). Denosumab is the most important product in the biotech’s pipeline, and some analysts believe it could become a blockbuster.

Amgen’s stock rose about 5 percent in after-hours trading.

Amgen sales were squeezed by the extra-tough warning labels the Food and Drug Administration required for Aranesp and Epogen, drugs that are used to ward off anemia, a common side effect of chemotherapy. Aranesp sales plunged 25 percent to $827 million in the fourth quarter, compared with the same period in 2006. Epogen sales slipped 3 percent to $638 million.

"Needless to say, 2007 was a challenging year for Amgen and our shareholders," said chief executive Kevin Sharer, in a teleconference with analysts. "In fact, in my 16 years with the company, it tops out as the toughest one we ever faced. I think in 2007 we proved we’re adaptive, we’re resilient, and we’re able to move the company ahead even under the most difficult circumstances."

Sharer said the study results comparing denosumab to Fosamax gave him "increased confidence."

"We could not have hoped for better results," said Sharer.

Bret Holley, analyst for Oppenheimer & Co., expects annual denosumab sales to peak at $2 billion by 2012. He said that the successful study, as well as the belief that declining Aranesp sales had bottomed out, pushed up the stock after hours.

Amgen could use some market resurgence, considering that its stock lost more than a third of its value in 2007.

The company reported sales increases for its other lead products. Combined quarterly sales for Neulasta and Neupogen, which are used to prevent infections in chemotherapy patients, jumped 9 percent to $1.1 billion.

Sales for Enbrel, a treatment for inflammatory diseases including psoriasis and rheumatoid arthritis, rose 8 percent in the quarter to more than $800 million. Amgen sells Enbrel in the U.S., and its partner Wyeth (WYE, Fortune 500) sells it overseas.

For the full-year 2007, Amgen reported a 4 percent increase in adjusted net income to $4.8 billion, or earnings of $4.29 per share, without expenses. Sales in 2007 increased 4 percent to $14.7 billion.

Looking ahead to the full-year 2008, the biotech expects earnings per share of $4 to $4.30 and total sales between $14.2 billion and $14.6 billion. Analysts expect $4.37 per share on revenue of $14.49 billion.

Amgen is the world’s largest biotech in terms of annual sales. Rival Genentech (DNA) is the No. 1 biotech in terms of market capitalization.

–Holley does not own Amgen stock and Oppenheimer does not conduct business with them. 

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Microsoft (MSFT.O: Quote, Profile, Research) signaled confidence to a rattled stock market by raising its full-year earnings outlook above Wall Street targets and reporting a 79 percent rise in quarterly profit on Thursday.

Analysts took the results as a good sign for technology companies in the face of a slowing economy, and Microsoft shares rose 4.5 percent in after-hours trade. That followed a 4 percent gain in regular trade, representing a gain of more than $26 billion in its market value for the day.

The results and raised forecasts from the world’s largest software maker come on the heels of disappointing outlooks from tech bellwethers Intel Corp (INTC.O: Quote, Profile, Research) and Apple Inc (AAPL.O: Quote, Profile, Research), which sent shivers through a U.S. stock market that shed about 10 percent to start the year, before bouncing.

Microsoft reported bumper quarterly sales of its Windows Vista operating system and Office software on the back of strong computer sales, while its Xbox unit cashed in on new game titles that spurred hardware demand.

“It’s clear that this new product cycle is paying off,” said Andy Miedler, technology analyst at Edward Jones. “We’re impressed that they had enough confidence to follow through and raised guidance.”

Chief Financial Officer Chris Liddell told Reuters in an interview that the company was “a little cautious” about sales in North America for the remainder of its fiscal year. Liddell later told analysts on a conference call that there were no signs of any significant impact on Microsoft from a slowing U.S. economy.

“You have to look really hard to find any weakness in our results,” said the usually-reserved Liddell.

Net profit in Microsoft’s fiscal second quarter rose to $4.7 billion, or 50 cents per diluted share, from $2.6 billion, or 26 cents per diluted share, in the year-ago period. Revenue rose 30 percent to $16.37 billion. 

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U.K. retail sales rose at the slowest pace since March 2006 and house prices declined for the first quarter in seven years, adding to the case for the Bank of England to cut interest rates again.

Revenue at stores open at least 12 months increased 0.3 percent from a year earlier in December, the British Retail Consortium said in London today. Home values fell 0.8 percent in the fourth quarter, the first drop since 2000, according the HBOS Plc, the country’s biggest mortgage lender.

Signs of slower economic growth prompted the Bank of England to reduce the benchmark interest rate from a six-year high last month after borrowing costs rose because of the collapse of the U.S. subprime-mortgage market. Retailer Next Plc says business is already slowing, and HBOS said today the Bank of England will need to cut rates twice more this year.

“It’s now incumbent on the bank to act quickly to ensure that the pain to consumers is kept to a minimum,” Kevin Hawkins, director general of the BRC, said in a Bloomberg Television interview. Past rate increases “are still working through. The pain will get sharper for everyone.”

Retail sales in the 13 countries sharing the euro fell 0.5 percent in November, the second month of declines, data from the European Union’s statistics agency showed today.

House Prices

HBOS said today house prices rose 1.3 percent in December from November, snapping three months of declines. That was the worst stretch since 1995. The pound rose as high as $1.9828 today and traded at $1.9753 as of 11:55 a.m. in London.

Some analysts said the house-price increase masked a wider property market slowdown. Merrill Lynch & Co. economist Nick Bate said “we would not read much into any month’s data” and Nick Parsons, head of market strategy at NAB Capital in London, said “I simply do not believe the numbers.”

The December gain also contrasts with other reports. Prices fell 0.5 percent last month, Nationwide Building Society said Dec. 28, and mortgage approvals fell to a three-year low in November, according to Bank of England data.

“There isn’t as much activity this time of year, we can see these ups and downs in the monthly changes as the year ends,” said Martin Ellis, chief economist at HBOS, in an interview. “It’s reinforcing our view that we’re heading for a more subdued market.”

Credit Conditions

Tighter credit conditions may discourage homebuyers and household spending. U.K. banks plan to make fewer loans to consumers and companies in the first quarter, according to the central bank’s quarterly survey on credit conditions, published last week.

Higher mortgage rates and gasoline prices will also leave consumers with less money to spend. Banks increased the cost of home loans fixed for two years in November, Bank of England data show. Gasoline prices stayed close to November’s record of $7.82 a gallon last month, according to AA Motoring Trust Trading Ltd.

John Lewis Partnership Plc, owner of the largest U.K. department-store chain, said today it expects the business climate to be “challenging” this year. Next, Britain’s third- largest clothing retailer, said Jan. 3 that U.K. same-store sales won’t rise in 2008 and Jessops Plc, a camera retailer, said revenue fell 21 percent in the seven weeks ended Jan. 6.

Sales of clothing and footwear declined for a third month in December while revenue from food, drink and cosmetics increased, today’s BRC report showed. The lobby group, which represents 80 percent of U.K. retailers, conducted the survey from Nov. 25 to Dec. 29.

Scope to Wait

While 10 of the 50 economists surveyed by Bloomberg News forecast an interest-rate cut as soon as this week, the Bank of England has scope to wait.

Growth in U.K. service industries from banks to airlines unexpectedly accelerated last month. In November, retail sales rose the most in three months as stores lowered prices, the statistics office reported Dec. 21. Inflation was slower than economists predicted that month and unemployment fell to the lowest since 1975.

Bank of England policy makers predict economic expansion of about 2 percent this year following 3 percent growth in 2007. They will make their next interest-rate decision on Jan. 10 after all nine of them voted to reduce borrowing costs last month to 5.5 percent. It was the first unanimous decision for a cut since the aftermath of the Sept. 11 attacks in 2001.
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