UBS upgrades AMGEN zo BUY; PT 70 (from 63)
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.