Amgen Inc. (AMGN) is mainly concerned with inflammation, oncology, bone health, cardiovascular disease, nephrology, and neurology. It has a collaboration agreement with Kyowa Kirin Co., Ltd. to develop and commercialize KHK4083, a Phase 3-ready anti-OX40 fully human monoclonal antibody for treating atopic dermatitis and other autoimmune diseases, as well as a research and development collaboration with Neumora Therapeutics, Inc. and Plexium, Inc.
The company’s shares have gained 10.5% over the past year and 5.6% over the past month to close its last trading session at $248.69. It has over 50 ongoing programs in its pipeline, and the business is more than capable of providing additional approvals or label extensions.
In addition, AMGN plans to broaden the permitted usage of Lumakras, oral medicine that targets a mutant variant of the KRAS gene, in conjunction with other treatments to treat individuals with early-stage lung cancer. According to Refinitiv, Wall Street analysts predict that Lumakras revenues will hit $1 billion annually by 2024.
Here's what could shape AMGN's performance in the near term:
Latest Development
Last month, AMGN announced that the FDA had authorized RIABNI (rituximab-arrx), a biosimilar of Rituxan, in combination with methotrexate for people with moderate to severe active rheumatoid arthritis (RA) who have had an unsatisfactory response to one or more tumor necrosis factor (TNF) antagonist treatments.
In May, AMGN published positive topline findings from the Phase 2 OCEAN(a)-DOSE clinical research, which evaluated olpasiran in 281 adult patients with Lipoprotein(a) levels more than 150 nmol/L and evidence of atherosclerotic cardiovascular disease (ASCVD). Olpasiran is a short interfering RNA designed to reduce the body's synthesis of apolipoprotein(a), a major component of Lp(a) that has been linked to an elevated risk of cardiovascular events.
Robust Financials
During the first quarter ended March 31, 2022, AMGN's total revenue increased 5.71% year-over-year to $6.24 billion. Its non-GAAP operating income increased 9.63% year-over-year to $3.14 billion. The company's non-GAAP net income grew 8.98% from the year-ago value to $2.34 billion, while its EPS amounted to $2.68.
Strong Profitability
AMGN's trailing-12-months gross profit margin of 75.2% is 36.3% higher than the industry average of 55.2%. Also, its ROC, net income margin, and ROA of 15.11%, 21.8%, and 9.7% compare to its respective negative industry averages. Furthermore, its asset turnover ratio of 0.43% is 24.9% higher than the industry average of 0.35%.
Impressive Growth Prospects
Street expects AMGN's revenues and EPS to rise 3.9% and 8.8% year-over-year to $27.27 billion and $18.99, respectively, in fiscal 2023. In addition, AMGN's EPS is expected to rise at a 7.1% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in all of the trailing four quarters.
Discounted Valuation
In terms of forward Non-GAAP P/E, the stock is currently trading at 14.25x, 25.11% lower than the industry average of 19.03x. Also, its forward EV/EBIT of 13.04x is 22.3% lower than the industry average of 16.78x. Moreover, AMGN's forward Price/Cash Flow of 13.38x is 17.9% lower than the industry average of 16.29x.
POWR Ratings Reflect Solid Prospects
AMGN has an overall grade of A, equating to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. AMGN has an A grade for Quality and a B for Growth and Stability. AMGN's strong profitability is consistent with the Quality grade. Its solid earnings and revenue growth potential justify the Growth grade. In addition, the stock beta of 0.58 is in sync with the Stability grade.
Of the 401 stocks in the F-rated Biotech industry, AMGN is ranked #4.
Beyond what I stated above, we have graded AMGN for Sentiment, Value, and Momentum. Get all AMGN ratings here.
Bottom Line
The biotech sector is primed for expansion, thanks to increased investments in research and development. So, considering AMGN’s higher-than-industry profitability, attractive valuation, and sales and earnings growth potential, we believe the stock could be a great buy now.
How Does Amgen Inc. (AMGN) Stack Up Against its Peers?
AMGN has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: Vertex Pharmaceuticals Inc. (VRTX), United Therapeutics Corporation (UTHR), and Sino Biopharmaceutical Limited (SBHMY).
AMGN shares were unchanged in premarket trading Monday. Year-to-date, AMGN has gained 12.39%, versus a -18.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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