Categories Analysis, Health Care

Here’s what you need to know before investing in Amgen (AMGN)

The company generates more than two-thirds of its revenue from 5-6 blockbuster products, led by Enbrel

The coronavirus outbreak has made leading pharma companies channelize their resources for vaccine development, and the efforts have been largely successful. While different brands of COVID-19 vaccines are being rolled out across the globe, Amgen Inc. (NASDAQ: AMGN) has joined hands with fellow drug makers to explore drug repurposing to fight the virus, at a time when the biotech giant is facing stiff generic competition.

The company’s stock has been going through a volatile phase since hitting a record high nearly a year ago, but gathered momentum in recent weeks and is once again hovering near the peak. Currently, the 12-month price target on the stock is $261.29, which points to a 5% upside, while analysts remain divided in their recommendations. But a company like Amgen, with strong fundamentals and market share, should be approached from a long-term perspective. Prospective buyers can also consider leveraging the favorable valuation.

Enbrel Leads

The company, specialized in oncology and hematology therapies, generates more than two-thirds of its revenue from a few blockbuster products led by Enbrel. While looming patent expirations remain a major concern, Amgen looks to offset the impact of related revenue losses by leveraging its robust pipeline that includes important drug candidates in advanced stages of commercial launch. Also, the company’s strong cash flow should help it take forward growth initiatives with ease, including strategic deals like the recent acquisition of Five Prime Therapeutics and Rodeo Therapeutics.

From Amgen’s Q4 2020 earnings conference call:

“We’ve built a track record featuring quality and speed. We’ve shown that with innovative first-in-class medicines like Repatha, the first approved PCSK9 inhibitor, and Aimovig the first approved CGRP inhibitor. We showed it also with biosimilars like MVASI and KANJINTI, the first approved biosimilars to Avastin and Herceptin here in the US. And we’re doing it right now Sotorasib, the first KRAS G12C inhibitor to be filed for approval, just 28 months after we dosed our first patient.”

Generic Threat

In the final months of 2020, sales of leading products like Epogen, Enbrel, Aranesp, Neulasta, and Neupogen dropped amid growing generic competition. In a sign that the slowdown might continue this year, the management recently issued full-year guidance that fell short of expectations. The weak outlook can be linked to the muted physician-patient interactions during the pandemic to some extent. On the positive side, the performance of the company’s biosimilar products has been encouraging.

Read management/analysts’ comments on Amgen’s Q4 2020 report

In the fourth quarter, revenues grew 7% to $6.6 billion and topped the Street view, aided by higher volume that was partially offset by a moderation in selling prices. At $2.6 per share, earnings were down 3% from last year but above the consensus estimate. In recent years, quarterly bottom-line performance exceeded the market’s prediction consistently. But the management’s cautious outlook took the sheen off the impressive outcome and the stock slipped.

Stock Performance

The downturn continued for more than a month before the stock regained strength early this month. The shares have gained 9% so far this year but often underperformed the broad market. They closed the last session slightly below the $250-mark and traded lower early Wednesday.

Looking for more insights?

Read the full conference call transcript here. It’s free!

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