In the realm of biotech investments, Amgen (AMGN) emerges as a compelling contender, offering a dividend yield of just over 3% backed by a solid track record of 12 years of consistent growth. Moreover, with its flagship mid-stage development drug MariTide, targeting obesity, the company holds potential for future growth and innovation in the biotech sector.
Valued at $144.8 billion, Amgen is a large biopharmaceutical company that has a diversified drug portfolio spanning blood disorders, immunology, bone health, oncology, pulmonology, and an expanding biosimilars portfolio.
Amgen has proven to be a solid stock to hold in recent years. By early 2022, it was priced at approximately $220 per share, soaring to its all-time high of around $330 in January 2024. Despite these gains, Amgen shares have lost 6.26% on a year-to-date basis, underperforming the 6.92% return of the S&P 500 Index ($SPX) during the same period.
Let’s determine whether Amgen merits inclusion in your portfolio or should be avoided.
Recent News for AMGN Stock
On April 26, Amgen announced the imminent submission of a Marketing Authorization Application to the European Medicines Agency for teprotumumab, a fully human monoclonal antibody and targeted inhibitor of the insulin-like growth factor-1 receptor, aimed at treating moderate to severe Thyroid Eye Disease in adults.
On April 15, TD Cowen lowered its price target on Amgen to $360 from $370, and kept a “Buy” rating. The company revised its model before Q1 earnings, utilizing its sales/scrip trackers and adjusting estimates to better match Q1 and 2024 sales and operating expenses guidance.
On March 1, Goldman Sachs (GS) upgraded Amgen to “Conviction Buy” from “Buy” with a $350 price target. According to a Goldman Sachs analyst, Amgen is poised to capitalize on multi-billion dollar opportunities by leveraging a “robust pipeline” of drugs currently in development, with many anticipated to have key clinical trial read-outs in 2024.
Amgen’s Obesity Drug And Other Candidates
Amgen is currently developing an injectable weight-loss treatment named MariTide (formerly AMG133), which holds potential advantages for patients as it seems to assist them in maintaining weight loss even after ceasing injections. Amgen’s MariTide has demonstrated promising safety and efficacy in preliminary trial results, suggesting it may be more effective than existing market treatments in aiding patients to maintain weight loss. Also, the company is testing this as a once-a-month injection, which would offer a superior alternative to the current market options that necessitate weekly injections. In addition, Amgen is developing an oral weight-loss treatment, which could be optimal for patients who do not tolerate injections.
Amgen is expected to unveil updates from phase 2 clinical trials on MariTide, along with phase 1 findings on its obesity pill, later this year, with favorable outcomes potentially serving as a significant upside catalyst for the stock.
The global weight-loss drugs market was valued at $3.83 billion in 2023 and is projected to reach $44.12 billion by 2029, exhibiting a compound annual growth rate of 49.85% during the period from 2024 to 2029. Consequently, should MariTide and Amgen’s other orally administered obesity treatments reach the market, the company’s earnings and revenues could experience a significant surge in the years ahead.
Amgen already boasts an exceptionally strong pipeline, with several candidates poised to potentially become revenue blockbusters in the future. Phase 3 trials include “AIMOVIG” for pediatric migraines, “AMJEVITA” for inflammation, “LUMAKRAS” for colorectal and lung cancers, “OLPASIRAN” for cardiovascular disease, and “TEZSPIRE” for severe asthma, among others, although this list is only a partial representation. Furthermore, the company has numerous candidates undergoing phase 2 and earlier stage clinical trials.
Amgen Earnings Preview
Amgen last issued its earnings results on Feb. 6. In the fourth quarter, the company delivered a year-over-year revenue increase of 19.9% to $8.2 billion, surpassing the consensus by $90 million. This top-line beat was propelled by 23% volume growth, partially offset by a 3% decrease in net selling price.
It’s important to highlight that a significant portion of this growth stemmed from the completion of the Horizon Therapeutics acquisition shortly after the beginning of the fourth quarter on October 26. Excluding Horizon’s sales, the company experienced comparable revenue growth of 5% year-over-year, driven by 9% volume growth. Meanwhile, Amgen’s adjusted earnings totaled $4.71 per share, exceeding the consensus by $0.12.
The company’s robust performance in the fourth quarter stemmed from nine brands achieving record sales, with blockbuster drugs Repatha, EVENITY, Prolia, and BLINCYTO all experiencing double-digit volume growth globally.
For the first quarter, Amgen stock analysts predict earnings of $3.76 per share, implying a 5.53% year-over-year decrease. At the same time, Wall Street expects AMGN’s FQ1 revenue to rise 22.15% year-over-year to $7.46 billion.
Amgen is due to report its March quarter earnings this Thursday, May 2.
AMGN Stock Valuation and Dividend Yield
Amgen’s valuations look attractive right now. The stock trades at a 2024 price-to-earnings multiple of 13.82x, which is below its five-year average of 14.16x. It also looks cheap compared to the sector’s median of 19.40x.
On the dividend side, AMGN offers an attractive 3.33% yield, significantly surpassing the sector median of 1.61%, with the dividend backed by a reasonable 45.68% payout ratio. Additionally, it boasts 12 consecutive years of dividend growth and a 5-year dividend CAGR of 9.82%.
What Are the Risks?
Risks facing Amgen include a rise in its net debt balance from $29.7 billion at the close of 2022 to $53.7 billion by the end of 2023, leading to increased interest expenses. Other risks involve the impact of new drug development on R&D expenses and negotiations regarding Medicare prices.
Options Market Sentiment
Looking at the June 21, 2024, option chain for AMGN, let’s figure out options market sentiment by comparing the open interest levels.
The put-call ratio at the $270.00 strike price, the nearest to the current share price, is at 4.17, indicating a much stronger preference for put options and potentially signaling an anticipated decline in the stock price.
What Do Analysts Expect for Amgen Stock?
Out of the 25 analysts covering AMGN stock, 11 recommend “Strong Buy,” and one recommends “Moderate Buy.” Three analysts rate the stock as a “Strong Sell,” while the remaining 10 analysts rate it as a “Hold.” The mean target price for AMGN stock is $303.45, which is 12.4% above Friday’s closing price.
The Bottom Line on AMGN Right Now
Despite the company’s compelling valuation and solid dividend yield, I recommend investors stay on the sidelines for now. Furthermore, the options market suggests that the stock could encounter short-term pressure. All things considered, investors should consider adopting a wait-and-see approach with the stock, evaluating its ability to balance dividend payments, debt reduction, and expenses on growth opportunities.
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.