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Here's Why Amgen Stock is Outperforming Its Industry Of Late

Zacks Equity Research

Shares of Amgen Inc. AMGN have risen 22.6% in the past three months against a 0.9% decrease registered by the industry during this period.

 

The district court’s decision last Friday, upholding the validity of Amgen’s two patents on blockbuster rheumatoid arthritis drug Enbrel against Novartis’ NVS generic arm Sandoz, was one of the biggest reasons for the stock price increase.

Sandoz received FDA approval for a biosimilar version of Enbrel, Erelzi in August 2016. However, Erelzi could not be launched in the United States due to the ongoing litigation with Amgen. The latest district court ruling prevents Sandoz from launching Erelzi, at least for now, and further delays its launch. Novartis said it will appeal the ruling to the US Court of Appeals for the Federal Circuit.

Despite lower demand hurting volumes of Enbrel, it remains the largest drug for Amgen. The launch of a biosimilar version in the United States would have rapidly eroded its sales. The favorable patent ruling came as a relief to investors concerned about potential competition to Enbrel. In fact, Amgen management had to face numerous questions about the Sandoz litigation on its third-quarter conference call in July. Back then, Bob Bradway, Amgen’s CEO had said that the company was “confident in the intellectual property surrounding Enbrel” and believed it had a “robust intellectual property for the molecule”. The favorable ruling, thus, removes a major overhang for Amgen stock.

Apart from this, last month, Amgen announced strong second-quarter results, beating estimates for both earnings and sales. It also raised the lower end of its previously issued sales and earnings guidance for 2019 for the second time this year based on its solid second-quarter performance.

Importantly, on the third quarter conference call, company said that its KRAS inhibitor for solid tumors, AMG-510 has shown responses in patients with colorectal and appendiceal cancer. Earlier, at the annual meeting of the American Society of Clinical Oncology, Amgen presented encouraging early clinical data on AMG-510. In the phase I study, AMG 510, wh  en given as a monotherapy, showed encouraging anti-tumor activity in patients with locally-advanced or metastatic KRASG12C mutant solid tumors like non-small cell lung cancer and colorectal cancer. AMG-510 is part of Amgen’s intriguing lineup of early and mid-stage programs, which can contribute to growth in the long term

Last month, Amgen and partner Allergan AGN also launched Mvasi and Kanjinti, biosimilar versions of Roche’s RHHBY blockbuster medicines, Avastin and Herceptin, respectively.

However, Amgen also faced a couple of pipeline setbacks in the past three months. In July, it announced discontinuation oftwo pivotal late-stage studies evaluating CNP520 to prevent or delay the symptoms of Alzheimer's disease in a high-risk population.In June, its new osteoporosis drug Evenity was given a negative opinion by the Committee for Medicinal Products for Human Use in the EU. Evenity was approved by the FDA in April and is under review in the EU. However, the favorable patent ruling and the strong second-quarter performance and encouraging guidance outweighed the negative impact of the pipeline setbacks and led to share price increase.

Amgen currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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