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Analysts Cautious of Amgen After Lukewarm Q2
Stock Analysis & Ideas

Analysts Cautious of Amgen After Lukewarm Q2

Biotech giant Amgen (AMGN) reported fairly tepid second-quarter 2021 results on Tuesday (August 3). While the company surpassed the consensus estimates for both top line and bottom line, and maintained its adjusted profit and sales outlook, it trimmed earnings per share (EPS) guidance to $8.84-$9.90 from $9.11-$10.71. This led to a dilemma among investors, and the stock slipped 0.8% in the extended trading session on Tuesday after gaining 1.8% during the day.

Notably, Amgen has a significant presence in medical sectors like oncology, hematology, cardiovascular diseases, neuroscience, inflammation, osteology and nephrology, and neuroscience markets. (SeeAmgen Dividend Date and History on TipRanks)

Lumakras, Amgen’s KRAS inhibitor for solid tumors, was the main subject of interest among analysts in the Q&A held after the earnings commentary. This was likely because the company neither mentioned any reported sales number for Lumakras in its press release nor in the presentation slides, and it clubbed with other products under the ‘Other’ segment.

Mizuho analyst Salim Syed shared a snapshot of the observations he made from the earnings and reiterated a Hold rating on Amgen with a price target of $200. This price target has an 15.23% downside from the current share price.

For the second quarter, consensus expectations on Lumakras sales were on the lower side. Nonetheless, Syed notes that KRAS testing has now been administered to 70% of NSCLC (non-small cell lung cancer) patients, which is a positive.

In the earnings call, Amgen noted that Lumakras was displaying strong momentum. It stated that it was “off to a strong start with unaided brand awareness increasing 20 points since launch.” Management also reported that 2,000 patients received Lumakras.

However, during the quarter, the IRS (Internal Revenue Service) served the company notices of deficiencies for 2010, 2011 and 2012. Management revealed that such a dispute would take a few years to settle, as the IRS seeks to raise the company’s federal tax by $3.6 billion, along with interest. Syed warns investors that this should be considered a risk.

As observed from the earnings results, revenues from the sales of arthritis drug — Enbrel— reduced due to lower prices and volumes. Nonetheless, osteoporosis medication Prolia and cholesterol treatment Repatha witnessed significant year-over-year growth of 24% and 43%, respectively.

Consensus among analysts for Amgen is a Moderate Buy based on 6 Buys, 6 Holds and 1 Sell. The average Amgen price target of $227.09 implies 3.7% downside potential from current levels.

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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