In 3Q15, Amgen (AMGN) recorded total operating expenses of about $3.4 billion, a fall of 5.1% from that spent in 3Q14. The fall in expenses enabled the company to report a net profit margin of about 36.4%, higher than the 34.1% margin projected by Wall Street analysts.
Research and development expenses
In 3Q15, Amgen’s research and development (or R&D) expenses were about 19.5% of the company’s total revenues, equal to the average biotechnology industry’s R&D expense ratio. Biogen (BIIB), Gilead Sciences (GILD), and AbbVie (ABBV) reported R&D expense ratios of about 18.7%, 8.9%, and 23.8%, respectively.
Compared to 3Q14, Amgen’s R&D expenses in 3Q15 rose by about 9.9%, or from $1.0 billion to $1.1 billion. This rise was mainly driven by the upfront payments made by the company for various licensing and collaboration deals as well as more investment for launching new products. However, R&D expenses were partially reduced due to savings from Amgen’s transformation strategy. To know more about this strategy, please refer to Amgen Initiates Restructuring Plan.
Selling, general, and administration expenses
In 3Q15, Amgen’s selling, general, and administration (or SG&A) expenses rose year-over-year by about 2.5% and reached $1.2 billion. The company’s SG&A expenses are mainly attributed to investments in launching new products as well as payments related to the marketing of Enbrel. SG&A expenses were also substantially reduced due to the company’s transformation strategy.
Amgen expects that the transformation program will result in savings worth $400 million in 2016. These savings could be reinvested for the company’s growth and result in reduced operating expenses.
Amgen accounts for 1.1% of the iShares Russell 1000 Growth ETF’s (IWF) total holdings.