UBS Investment Research Amgen Inc. Timing is Right - Upgrading to Buy Expect dmab launch to drive growth, while core business stabilizes We look to the near-term approval and subsequent launch of dmab in 2010 as the highest profile biotech introduction in the next several years. We estimate peak 2013 dmab revenues of $2.5bn (including PMO, HALT and SRE). Also, with ESA safety concerns largely passed, and a workable bundling legislation proposal, we believe AMGN’s base business has stabilized, albeit with modest growth. Minimal Healthcare reform impact We believe AMGN will benefit from a conclusive resolution of US HC reform efforts. Our view is that reform will increase access to a significant portion of the est. 47m uninsured, and will have little impact on pricing pressure and cost containment on most biotech products. More specifically Amgen has minimal “dual-eligibles” exposure (~$20m in 2010), and donut hole legislation is likely to be a net neutral. Also we believe the impact of US biosimilars legislation has long been anticipated and priced into Amgen’s shares. Raising PT as removal of Enbrel profit split improves LT margins In our view, the Street currently under-appreciates the impact of the removal of the Enbrel profit split with Wyeth, and margin expansion when the co-marketing agreement expires in 2013. We note AMGN has historically paid a portion of Enbrel profits to Wyeth, which equated to $984m and $1,195m in ‘07 and ‘08, respectively, or approx. 1/3 of total SG&A. Valuation: Buy with a new $70 PT (Neutral with $63 previously) We derive our new $70 12-month PT using UBS’ proprietary VCAM (DCF-based) methodology.
There isn't much new in the UBS analysis. They're just getting ahead of the deno decision. Morgan Stanley has held UBS' view for at least 4 months longer now. UBS giving an upgrade for one quarter doesn't prove that Sharer has been doing a good job for the last 10 years though.