After reading the presentation that Robert Bradway, the CEO of Amgen (AMGN), gave at the J.P. Morgan Healthcare Conference on January 11, 2022, I am confident that he and his management team have a plan to drive up shareholder value for years to come.
AMGN can become a huge player in three submarkets of the pharmaceutical space: the biosimilars market, the traditional pharmaceutical market, and the new RNA therapy arena. Because of this plan and management’s proven track record that shows they can execute this plan, I am bullish on this stock.
What is most exciting in the short term is Amgen’s plans for the biosimilars market. Amgen currently has five biosimilars on the market that have created approximately $2 billion in revenue for the company in 2021. That amount is set to explode when Amjevita, the Humira biosimilar, is launched on January 31, 2023. AMGN also has biosimilars coming to market in the near term for Stelara, Eylea, and Soliris, and it has an additional three biosimilars under development to bring the total portfolio to 11.
By 2030, the company expects the revenues from biosimilars to more than double the $2 billion 2021 revenue figure.
The second part of management’s plan to drive shareholder growth is Amgen’s traditional drug pipeline. The company has a significant oncology pipeline with opportunities to drive long-term results and growth with novel therapies in the lung, prostate, and gastrointestinal patient populations.
Amgen also has a broad pipeline of innovative products to fight inflammation and cardiovascular diseases, such as Olpasiran, a small piece of interfering RNA that targets lipoprotein(a).
The third area of management’s growth plan that excites me is what the company calls its next generation of research capabilities, where AMGN will begin to use high throughput wet-lab capabilities to focus on DNA sequence-based drug design and engineering to make multispecific and induced-proximity drugs.
I am particularly excited about this next-gen research capability as I believe this is the next frontier of science that will lead to the creation of whole new types of medicine like Biogen’s Spinraza, where genetic defects that cause disease are being treated for the first time.
This will also open a new front for Amgen to compete with the likes of Biogen (BIIB), Ionis (IONS), and Moderna (MRNA), which are all focusing on RNA therapies to prevent and/or treat diseases. This also could drive shareholder value through the roof.
Recent Results and Dividend
Amgen’s stock has been trading between $198.64 (the 52-week low set on November 30, 2021) and $261.00 (the 52-week high set on April 20, 2022).
Amgen brought in revenues of $25.98 billion over the last twelve months and net income of $5.9 billion over the same period.
The company has reported fourth-quarter earnings of $4.36 per share, beating analyst estimates of $4.04 per share by $0.32. It has also reported $17.11 in earnings per share for 2021, beating analyst estimates of $16.83 by $0.28 during that period.
Amgen currently pays a dividend of $1.94 per quarter. This is a dividend yield of 3.42%; AMGN’s dividend has been very strong, with the company able to grow it for the past 11 years.
The company has a solid balance sheet. It has a current ratio of 1.6, so it has enough current assets on hand to pay its bills for the next year and a half.
When I calculated the stock’s intrinsic value by modeling discounted cash flows, I pegged it at $461.20. I believe that Amgen’s three different types of products in its pipeline right now (traditional drugs, biosimilars, and next-generation genetic research) will yield many future drug marketing approvals, and this will act as a catalyst to drive the share price up to the intrinsic value of the stock.
Wall Street’s Take
Turning to Wall Street, AMGN stock has a Moderate Buy consensus rating, based on six Buys, 11 Holds, and one Sell assigned in the past three months.
The average Amgen price target of $243.50 implies 8.1% upside potential.
TipRanks.com shows that 97% of the 35 bloggers that have blogged about Amgen in the last three months are bullish, while only 69% of bloggers are bullish on the Healthcare sector.
Conclusion
Based on the intrinsic value of this stock, Amgen’s past performance, and its three-pronged approach to research and development, I am convinced that the company will create investor value for a very long time. As such, I am very bullish on this stock.
Download the TipRanks mobile app now
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Read full Disclaimer & Disclosure
