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What Do Amgen’s Newly Added Risk Factors Reveal?

Amgen (AMGN) is an American multinational drug company. It develops and produces therapeutic products targeting a range of medical conditions, including oncology, cardiovascular, and inflammation diseases. Its drugs sell under brands such as LUMAKRAS, XGEVA, and Neulasta.

For Q4 2021, Amgen reported a 3% year-over-year rise in revenue to $6.8 billion, falling slightly short of the consensus estimate of $6.9 billion. It posted adjusted EPS of $4.36, which jumped from $3.46 in the same quarter the previous year and beat the consensus estimate of $4.12.

Amgen stock currently offers a dividend yield of 3.22%, ranking it among the highest yielding stocks in its sector where the average yield is 1.37%. 

With this in mind, we used TipRanks to take a look at the newly added risk factors for Amgen.

Risk Factors

According to the new TipRanks Risk Factors tool, Amgen’s main risk categories are Legal and Regulatory and Ability to Sell, each with 7 of the total 29 risks identified for the stock. Macro and Political and Tech and Innovation are the next two major risk categories with 5 and 4 risks, respectively. Amgen has recently updated its profile with two new risk factors.

The company informs investors that stakeholders, such as investors and employees, are increasingly focusing on corporate environmental, social, and governance (ESG) practices. Amgen says it is working toward operating its business in a socially inclusive and environmentally responsible manner. It explains that achieving its ESG goals requires long-term investments and coordinated efforts. It says it may incur additional costs to implement its ESG goals and monitor and report the results.

The problem is that ESG expectations and standards keep changing. It means the company may be unable to accurately assess the ESG priorities of its stakeholders. Therefore, the company cautions that failure to meet the ESG expectations of its stakeholders could have a material adverse impact on its business, reputation, and stock price.

In another newly added risk factor, Amgen highlights the threat that climate change poses to its business. It explains that many of its operations and facilities, such as R&D centers and manufacturing sites, are located in areas prone to natural disasters.  For example, Amgen carries out a substantial majority of its commercial manufacturing in Puerto Rico, where Hurricane Maria caused severe damage in 2017. The company also has significant clinical manufacturing operations in California, which has also experienced many natural disasters.

Therefore, Amgen cautions that extreme weather events and natural disasters caused by or amplified by climate change could adversely affect its business. It mentions disruptions of clinical trial and manufacturing activities, adding that such challenges could limit its product sales.

Analysts’ Take

BMO Capital analyst Evan David Seigerman recently reiterated a Hold rating on Amgen stock with a price target of $240, which suggests 8.26% upside potential. 

Consensus among analysts is a Moderate Buy based on 6 Buys, 11 Holds, and 1 Sell. The average Amgen price target of $243.50 implies 9.84% upside potential to current levels.

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