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AMGN: Amgen Stock Has Plenty of Opportunity (Even If Wall Street Doesn’t See It)

The market has too dim a view of Amgen's future prospects

   

Amgen Inc. (NASDAQ:AMGN) stock still has plenty of life, despite the market’s lukewarm take on the biotech giant in 2015. Although the market reacted negatively to AMGN’s prospects on its product line and future earnings, a second look tells a different story.

amgen-amgn-stockAMGN actually has a stronger product line and more robust pipeline than the market’s giving it credit for. Amgen stock therefore should have a brighter outlook, also.

The Market’s Take on Amgen Stock

The market sees Amgen stock as an aging biotech, once on the cutting edge of developing medicines but a company that’s now less innovative. The market has been more positive on rivals such as Gilead Sciences, Inc. (NASDAQ:GILD), Celgene Corporation (NASDAQ:CELG), Abbvie Inc (NYSE:ABBV) and Biogen Idec Inc (NASDAQ:BIIB), as well as other smaller companies considered at the forefront of drug development.

Now that Amgen stock isn’t growing that rapidly and considering it has paid a dividend (which currently yields 2.1%) for several years, the market regards it as a later-stage growth stock, at best, at worst a former growth stock. Some see it morphing into the next phase — more of a slow-growth Big Pharma stock such as a Merck & Co., Inc. (NYSE:MRK) or Pfizer Inc. (NYSE:PFE).

That’s not necessarily a bad thing, but the market’s not likely to reward a company so much for that.

Growing Competition: Biosimilars

What stirs any drug company’s prospects is the product pipeline and competition. For big pharma, drugs going off patent and facing generic competition is closely watched. With the biotechs, it’s biosimilars.

Amgen faces biosimilar challenges from Novartis AG (ADR)  (NYSE:NVS) against Amgen’s signature biologics, Neupogen and Neulasta — drugs that help chemotherapy patients fight the side effects of treatment by restoring white blood cells. Other biosimilars may be developed by rival companies to compete with AMGN’s concentrated product line.

Amgen’s Strength

Amgen has brought new drugs to market such as Kyprolis and is also developing Blincyto, both for blood cancer. Blincyto is an infusible that uses the body’s own immune system to fight a rare form of leukemia that makes defective white cells. Experimental drugs such as Repatha for cholesterol and Colander, a drug to treat chronic heart failure, are in the works.

In addition to these new drugs, AMGN continues to market Enbrel, its immune disorder and arthritis drug, as well as Prolia, its staple osteoporosis treatment. Then there are Epogen and Aranesp, its EPO blood-cell stimulating agents that are widely used to combat anemia in chemo patients and others.

While Amgen stock’s staple drugs face competition from biosimilars, Amgen is developing a biosimilar to Abbvie’s rheumatoid arthritis drug Humira. All told, AMGN has nine biosimilars in development.

AMGN’s Business Future

Amgen’s product cycle, with its strong current lineup and its pipeline, is actually in a good place.  Neulasta and Neupogen accounted for nearly $1.5 billion in last quarter’s revenue, with Enbrel another $1.3 billion and AMGN’s EPO line another $1 billion. These drugs will remain part of a potent, concentrated lineup that should continue to deliver major market share.

Biosimilars, while a potential challenge, aren’t going to be developed overnight. And AMGN’s robust pipeline should contribute soon to a more diversified drug lineup.

The company has cut costs and trimmed its workforce, and will deploy the savings to bolster its launches as it ramps up its new product cycle. It’s reasonable to expect another round of growth.

Amgen Stock’s Prospects

At its recent stock price of around $155, Amgen stock trades at 15 times 2014 earnings, and about 17 times conservative 2015 estimates. These are more like Big Pharma valuations than biotech ones.

The market has overdone its negative take on Amgen stock. AMGN has much more reserve strength in both its product line and pipeline, which should be demonstrated in the upcoming quarters. Look for its earnings and revenue to emerge on the higher side of estimates.

Given the fundamentals and the way the market has knocked down the share price, it’s an opportunity to reel in AMGN shares for the long term. Amgen stock is an appealing buy.

As of this writing, Greg Sushinsky did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, http://investorplace.com/2015/02/amgn-amgen-stock-plenty-opportunity-even-wall-street-doesnt-see/.

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