UPLIZNA, TEZSPIRE And MariTide Will Shape Future Impact

Key Takeaways

• New product launches and strategic investments, including in the obesity drug market, indicate potential revenue and margin growth through innovative medicines and targeted markets.
  
• Strategic capital investments and growth in the biosimilars portfolio could sustain earnings, improve margins, and correct potential stock undervaluation.
  
• Increasing competition and tariffs may hinder Amgen's revenue growth, requiring strategic market penetration and innovation to maintain competitiveness and manage costs.

Catalysts

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

• Amgen's strong volume growth, including a 14% increase driven by new product launches and positive Phase 3 data, signals potential for further revenue growth as demand for innovative medicines continues to rise.
  
• Successful early-stage launches and expected growth in their rare disease and inflammation portfolios, with key products like UPLIZNA and TEZSPIRE in critical, underserved treatment areas, could significantly impact revenue and net margins.
  
• Expansion and advancement of the MariTide program and strategic investments in weight management and cardiometabolic conditions indicate potential for future revenue and margin growth, driven by a targeted obesity drug market.
  
• The growth of Amgen's biosimilars portfolio, with launches such as PAVBLU and upcoming launches in large markets, highlights a strategy that could bolster long-term revenue and potentially improve earnings through higher-margin opportunities.
  
• Strategic capital investments in U.S. infrastructure and a focus on operational agility, amidst policy uncertainty, suggest an aim to sustain earnings growth and secure long-term returns, supporting potential stock undervaluation correction.

Amgen Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Amgen's revenue will grow by 2.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 17.4% today to 24.0% in 3 years time.
• Analysts expect earnings to reach $8.9 billion (and earnings per share of $16.92) by about May 2028, up from $5.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $12.6 billion in earnings, and the most bearish expecting $6.8 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.3x on those 2028 earnings, down from 24.5x today. This future PE is greater than the current PE for the US Biotechs industry at 18.3x.
• Analysts expect the number of shares outstanding to grow by 0.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.73%, as per the Simply Wall St company report.

Amgen Future Earnings Per Share Growth

Risks

• Amgen is facing uncertainty related to tariffs and taxes, which could impact its operating costs and net margins if additional tariffs are implemented in the future.
  
• There is growing competition for Amgen's Repatha from Novartis' LEQVIO and potential oral PCSK9 inhibitors, which could affect Amgen's market share and revenue growth in the cholesterol-lowering segment.
  
• The potential entry of oral competitors in the incretin market poses a risk to the growth trajectory of MariTide, Amgen’s obesity treatment, potentially impacting future revenues.
  
• TEPEZZA has shown slower-than-expected growth, requiring expansion into new prescriber bases and relying on the development of a subcutaneous form, which could constrain short-term revenue growth from this product.
  
• The rare disease portfolio, including TEPEZZA and UPLIZNA, is in the early stages with the potential for variability in uptake and requires effective market penetration strategies to ensure sustained revenue growth.

Valuation

• The analysts have a consensus price target of $313.618 for Amgen based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $36.9 billion, earnings will come to $8.9 billion, and it would be trading on a PE ratio of 23.3x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of $270.44, the analyst price target of $313.62 is 13.8% 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.