Repatha, EVENITY And TEPEZZA Launches Will Open New Treatment Avenues

Key Takeaways

• Innovative product launches and strategic expansions in rare diseases are driving significant revenue growth and solidifying market leadership.
  
• AI deployment and a robust pipeline with upcoming launches improve operational efficiencies and expand earnings potential in key therapeutic areas.
  
• Challenges from regulatory changes, competition, and patent expirations could pressure Amgen's revenue growth and margins amid rising R&D expenses.

Catalysts

Amgen Inc. discovers, develops, manufactures, and delivers human therapeutics worldwide.

• Innovative product launches in cardiovascular and bone health, such as Repatha and EVENITY, are showing strong sales growth, with high unmet patient needs and increased global demand expected to drive substantial revenue increases as they continue to penetrate untreated populations.
  
• Strategic expansion in rare diseases, including international regulatory approvals for TEPEZZA and the launch of UPLIZNA in new indications, is anticipated to significantly enhance revenue and solidify Amgen's leadership in this high-value segment.
  
• The successful deployment of artificial intelligence across Amgen's operations is expected to improve efficiencies in drug development, manufacturing, and commercial operations, which can positively impact net margins.
  
• A robust pipeline with multiple Phase III data readouts across general medicine, rare disease, inflammation, and oncology, particularly with novel treatments like MariTide for obesity, is poised to drive earnings growth by addressing large unmet medical needs and expanding into new therapeutic areas.
  
• Continued growth in the biosimilar portfolio with several product launches, coupled with an effective strategy to combat price erosion, suggests a positive outlook for revenue contribution from this segment without significant margin decline.

Amgen Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Amgen compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Amgen's revenue will grow by 8.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.2% today to 30.2% in 3 years time.
• The bullish analysts expect earnings to reach $12.9 billion (and earnings per share of $23.64) by about April 2028, up from $4.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.5x on those 2028 earnings, down from 36.6x today. This future PE is greater than the current PE for the US Biotechs industry at 19.6x.
• Analysts expect the number of shares outstanding to grow by 0.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

Amgen Future Earnings Per Share Growth

Risks

• Amgen faces challenges from regulatory and political change, declining net prices, and losses of exclusivity, which could negatively impact revenue and net margins.
  
• Increased competition from biosimilar and generic products across nearly 50% of Amgen's revenue-generating products could pressure revenue growth.
  
• The upcoming denosumab patent expiration presents a risk of revenue decline, which may not be fully offset by growth from other products in Amgen's portfolio.
  
• The expansion into international markets, especially for products like TEPEZZA, depends on the successful navigation of regulatory approval processes, which could affect revenue forecasts if delayed or unsuccessful.
  
• Rising R&D expenses, driven by substantial investments in the late-stage pipeline, may impact net margins and earnings if not matched by commensurate revenue increases from successful new product rollouts.

Valuation

• The assumed bullish price target for Amgen is $400.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Amgen's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $400.0, and the most bearish reporting a price target of just $185.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $42.7 billion, earnings will come to $12.9 billion, and it would be trading on a PE ratio of 20.5x, assuming you use a discount rate of 7.1%.
• Given the current share price of $278.4, the bullish analyst price target of $400.0 is 30.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.