Here's What is Driving Amgen (AMGN) Stock's Outperformance
Amgen AMGN is one of the biggest biotech companies in the world, with a strong presence in the oncology/hematology, cardiovascular disease, neuroscience, inflammation, bone health and nephrology and neuroscience markets.
Thousand Oaks, CA-based Amgen also has a promising pipeline of cancer drugs. It has one of the strongest cash positions in the biotech sector, which could be used to acquire more pipeline assets that could fuel long-term growth. Biosimilar drugs are also a key part of Amgen’s growth strategy.
Though the stock has lost 0.6% this year so far, it has outperformed the decline of 14.3% for the industry.
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Amgen’s key drugs like Prolia, Repatha and Otezla are aiding sales, driven by volume growth. These drugs are gaining consistent approvals for label expansions.
Moreover, Amgen is evaluating Prolia/Xgeva, Vectibix, Enbrel, Aranesp, Kyprolis, Nplate and Blincyto for additional indications. A recent key new drug approval was Tezspire/tezepelumab to treat severe asthma in the United States in December 2021. Amgen has a partnership with AstraZeneca AZN for Tezspire. AstraZeneca announced that Tezspire was approved in Japan and Europe in September 2022. AMGN and AstraZeneca share costs and profits equally after payment by the latter of a mid-single-digit inventor royalty to the former. While AstraZeneca leads development, Amgen leads manufacturing.
Another new drug, Lumakras (sotorasib) was approved for advanced non-small cell lung cancer (NSCLC) in the United States in May 2021 and the EU in January 2022. It is now launched in more than 45 countries. Though sales of this key new drug have been slower than anticipated, Amgen’s label expansion studies on Lumakras in earlier lines of therapy, which have the potential to significantly expand the currently addressable patient population, are progressing rapidly.
Amgen also boasts a strong biosimilars portfolio, which is an important long-term growth driver. It markets Kanjinti (a biosimilar of Roche’s Herceptin) and Mvasi (a biosimilar of Roche’s Avastin) in the United States and Amgevita (a biosimilar of AbbVie’s [ABBV] Humira), Kanjinti and Mvasi outside the United States. In the United States, AbbVie’s Humira biosimilar, Amjevita was launched in January 2023. With a five-month lead over the next biosimilar entrant, Amgen expects a rapid uptake of the biosimilar in 2023.
Biosimilars of J&J’s Stelara (ABP 654), Alexion’s Soliris (ABP 959) and Regeneron’s Eylea (ABP 938) are in late-stage development.
Though sales of Amgen’s present biosimilars, Kanjinti and Mvasi, are falling due to lower prices and volume declines due to increased competition, biosimilar revenues are expected to return to growth with the launch of Amjevita (Humira biosimilar) in 2023 and the next wave of launches of biosimilar versions of Stelara, Eylea and Soliris.
The company has six more biosimilar launches planned for global markets by the end of 2030, which should drive long-term growth.
Amgen has been quite active on the M&A front lately. In 2022, it bought ChemoCentryx, which added a newly launched innovative rare disease drug, Tavneos, to its portfolio.
In December, Amgen announced a definitive agreement to acquire Horizon Therapeutics HZNP for $116.5 per share in cash or $27.8 billion. The acquisition will add several first-in-class early-in-lifecycle biologic drugs like Tepezza, Krystexxa and Uplizna to Amgen’s broad and diversified portfolio. The Horizon Therapeutics acquisition is expected to close in the first half of 2023.
Amgen has its share of problems. Increased pricing headwinds and competitive pressure are hurting sales of many of Amgen’s products, including some biosimilars. The Humira U.S. sales erosion in 2023 and increasing biosimilar competition for some other legacy products create potential revenue headwinds. The softness in sales of Enbrel, one of Amgen’s largest products, is also a key cause for concern. Pricing pressure and stiff competition are hurting sales of Enbrel, one of the main drivers of the firm’s revenues.
Amgen’s net selling price has declined for the past few years, with the trend expected to continue in 2023 due to increased competition. Amgen expects a mid-single-digit price decline in 2023. In addition, foreign exchange headwinds with the strengthening of the U.S. dollar, increasing interest rates, persistently high inflation, supply chain pressure and the war in Europe are creating an uncertain macro environment.
Nonetheless, continued strong growth of key drugs like Repatha, Prolia and Evenity and contribution from newer drugs Tezspire and Tavneos, higher sales from ex-U.S. markets, increased contribution from its high-quality biosimilars and costs savings should keep the stock afloat in 2023.
Amgen currently has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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