Analysts' Choice: Amgen Can Play Biosimilar Game

8/29/2016


  Recent Price
$171
  Dividend
$4.00
  Yield
2.3%
  P/E Ratio
15
  Shares (millions)
756
  Long-Term Debt As % Of Capital
48%
  52-Week Price Range
$176.64 - $130.09

Amgen ($171; AMGN) finds itself on both sides of a health-care battle with a lot of fighting yet to happen.

The largest U.S. biotechnology firm by stock-market value ($129 billion) is developing several biosimilars, most notably a version of AbbVie's ($65; ABBV) $14 billion wonder drug Humira. But in January, pharmacy-benefit manager CVS Health ($97; CVS) plans to drop coverage of Amgen's chemotherapy drug Neupogen in favor of cheaper copycats.

In the first half of this year, Amgen's chemo drug Neulasta and anti-inflammatory Enbrel combined to generate nearly half of revenue. Last month a Food and Drug Administration advisory panel backed a biosimilar for Enbrel, and several rivals are targeting Neulasta.

Generic versions of biotech compounds, known as biosimilars, haven't been around long. But while Amgen must feel its way around the biosimilar issue, the company is no stranger to generic competition. When the rules of a game change, the strongest players tend to adapt best, and Amgen's willingness to play both offense and defense with biosimilars should help it maintain a market-leading position. In the Aug. 15 issue of the Forecasts, we added Amgen to the Buy and Long-Term Buy lists.

Drug developments

Last month an advisory panel unanimously recommended approval of Amgen's biosimilar for Humira, and the FDA is expected to make a decision by Sept. 25. AbbVie has sued Amgen for patent infringement, which would likely delay any launch; most analysts don't expect a Humira biosimilar to reach market before 2020.

Cholesterol fighter Repatha may be Amgen's most exciting drug. Despite just $27 million in sales in the June quarter, some analysts project peak annual sales of more than $5 billion. A lot hinges on phase III study data expected in the first quarter of 2017. Other bright spots include osteoporosis drug Prolia, bone-cancer treatment Kyprolis, and Blincyto for leukemia — all of which grew sales at least 30% in the June quarter. Amgen is testing new uses for Repatha, Kyprolis, and Blincyto, while it has reached phase III or submission stage for drugs that treat osteoporosis, migraines, and several types of cancer. 

Amgen's sales rose 8% over the last year, with per-share profits growing 21%, helped by an increase in operating profit margin to a 16-year high of 50.2%, up from 47.4% a year earlier. Analysts expect profit growth of 10% this year and next year, and estimates are on the rise. Since Amgen released stronger-than-expected earnings for the June quarter and boosted full-year guidance, the consensus targets for 2016 and 2017 have risen 2%. Amgen has made a habit of exceeding expectations, topping the profit consensus in 14 straight quarters by an average of 11%.

Over the last three months, Amgen has returned 12%, nearly triple the average of 4% for biotech stocks in the S&P 500 Index. Despite that outperformance, Amgen trades at 15 times projected year-ahead earnings, 30% below the industry average.

Obtain an annual report for Amgen Inc. at 1 Amgen Center Drive, Thousand Oaks, CA 91320, (805) 447-1000, www.amgen.com.

AMGEN
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Jun '16
2.84
vs.
2.57
6%
164.70
-
143.82
15 - 13
Mar '16
2.90
vs.
2.48
10%
160.21
-
139.02
15 - 13
Dec '15
2.61
vs.
2.16
4%
165.23
-
135.64
17 - 14
Sep '15
2.72
vs.
2.30
14%
181.81
-
130.09
19 - 14
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2015
21.66
10.38
3.16
181.81
-
130.09
18 - 13
2014
20.06
8.70
2.44
173.14
-
108.20
20 - 12
2013
18.68
7.60
1.88
119.70
-
81.56
16 - 11
2012
17.27
6.46
1.44
90.81
-
63.30
14 - 10
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
93
82
60
92
85
86
60

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.
   NA Not available.


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