Amgen Inc., the world’s largest biotechnology company, will pay its first dividend next quarter even as research spending continues to absorb as much as 20 percent of revenue, Chief Executive Officer Kevin Sharer said.
Amgen will declare the quarterly payment with its second-quarter earnings release, Sharer said today at an investors’ meeting in New York. Amgen is planning an annual payout ratio of 20 percent of adjusted net income, which, if applied to the current quarter, would amount to 27 cents a share, said Chief Financial Officer Jonathan Peacock.
Amgen shares have fallen 31 percent since the beginning of 2006, even as its cash hoard grew to $17.4 billion. Some investors have sought a dividend since reports surfaced in November that the company may buy Swiss drugmaker Actelion Ltd. for $9.8 billion. Amgen has more cash and short-term investments on hand than any U.S. drugmaker except for Pfizer Inc. and Johnson & Johnson.
“Using capital wisely means returning meaningful cash to shareholders,” Sharer said at the meeting.
Amgen, based in Thousand Oaks, California, dropped 3 percent, or $1.67, to $54.51 at 10:26 a.m. New York time in Nasdaq Stock Market composite trading. The shares had fallen 4.3 percent in the 12 months before today.
The stock is declining on concern that the U.S. Food and Drug Administration will require Amgen to update the label for its Epogen anemia drug, which would have the effect of lowering the dosage for dialysis patients, Mark Schoenebaum, an analyst with ISI Group in New York, said today in an e-mail. On a conference call late yesterday, Amgen officials said the FDA wants to “get away” from hemoglobin targets in dialysis treatment, Schoenebaum said.
“Removal of the target altogether could reduce average doses per dialysis patient and force the street to lower Epogen estimates to some degree,” Schoenebaum said.
The board also approved a $5 billion stock repurchase, in addition to the $2.2 billion buyback remaining in its current program. The company said it intends to return an average of 60 percent of adjusted net income to investors in the form of dividends and stock repurchases.
Amgen pioneered biological therapies 30 years ago for cancer and kidney-disease patients. Revenue tripled to $12.4 billion over the five years ended in 2005, after the company introduced Aranesp for anemia. Over the next five years, annual sales growth slowed to 1.4 percent as the drug was linked to strokes and heart attacks.
Over the past five years, Amgen has announced seven acquisitions worth a combined $1.6 billion, according to Bloomberg data. The largest was its $425 million purchase of BioVex Group Inc. in January.
Pfizer, based in New York, pays a 20-cent quarterly dividend and New Brunswick, New Jersey-based J&J pays 54 cents.
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