Expanding Targeted Therapies And Biosimilars Will Shape Market Trends

Key Takeaways

• Expanding treatments for chronic diseases and innovative personalized therapies position Amgen for sustained revenue growth and margin expansion.
  
• Growth in biosimilars, digital transformation, and penetration of under-treated populations diversify revenues and boost long-term earnings potential.
  
• Mounting drug pricing pressures, biosimilar competition, high R&D costs, regulatory uncertainties, and stagnating demographics threaten Amgen's revenue growth, margin expansion, and market leadership.

Catalysts

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

• Growing demand for therapies targeting chronic and age-related diseases is expected to expand Amgen's addressable patient base, as seen in the outsized growth of treatments for cardiovascular disease, bone health, obesity, and rare diseases-trends likely to support sustained revenue growth.
  
• Advancements in personalized and targeted therapies, reflected in the robust late-stage pipeline (e.g., MariTide for obesity/type 2 diabetes, Repatha and olpasiran for cardiovascular, multiple bispecific T-cell engagers for oncology), position Amgen to launch high-margin, first-in-class products that drive both top-line growth and margin expansion in the coming years.
  
• Rapid adoption and expanding global footprint of the biosimilars portfolio (sales up 40% YoY, $12B cumulative since 2018), combined with regulatory changes likely to accelerate biosimilar approvals, are set to diversify revenue streams and buffer against losses from patent expirations-improving revenue stability and supporting free cash flow.
  
• Operational efficiencies and large-scale digital transformation-including AI-driven innovation and digitized workflows-are expected to enhance productivity across R&D and commercial operations, supporting higher net margins and improved long-term earnings power.
  
• Accelerating penetration in large, under-treated populations (e.g., ~2 million high-risk bone health patients in the US alone, with only 10% treated; global obesity market with massive unmet need) indicates significant runway for organic volume growth, which, coupled with reduced price erosion and robust product launches, should underpin rising revenues and long-term earnings.

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 23.5% in 3 years time.
• Analysts expect earnings to reach $8.7 billion (and earnings per share of $16.74) by about August 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 $7.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.8x on those 2028 earnings, down from 27.2x today. This future PE is greater than the current PE for the US Biotechs industry at 16.7x.
• Analysts expect the number of shares outstanding to grow by 0.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.12%, as per the Simply Wall St company report.

Amgen Future Earnings Per Share Growth

Risks

• Ongoing and increasing industry-wide drug pricing pressures-highlighted by lower net selling prices for certain products (e.g., Prolia) and active government efforts toward health care reform and drug price reduction-pose a significant threat to future top-line revenue growth and margin expansion.
  
• Biosimilar competition in key franchises (notably in Prolia, as three competing biosimilars have entered the U.S. market) and anticipated biosimilar launches for additional products could erode market share and compress revenue and earnings, particularly as more Amgen products lose exclusivity in the years ahead.
  
• Heavy, sustained R&D and late-stage pipeline investment-projected at more than 20% growth in 2025 and increasing capital expenditures to expand manufacturing-may pressure near
• and medium-term net margins and cash flow, particularly if late-stage programs fail to deliver expected commercial success.
  
• Potential regulatory changes or delays, including evolving biosimilar approval pathways, unpredictable international regulatory requirements, and the necessity of large, long-duration outcomes trials, could lengthen time-to-market or increase costs-directly impacting revenue timing and profitability.
  
• Demographic trends indicating plateauing aging populations in developed markets, combined with strong competition (including cheaper or more convenient oral obesity therapies from competitors like Eli Lilly), could limit patient pool growth for core therapy areas, challenging both revenue expansion and Amgen's pricing power over the longer term.

Valuation

• The analysts have a consensus price target of $313.481 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 $37.0 billion, earnings will come to $8.7 billion, and it would be trading on a PE ratio of 23.8x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of $300.08, the analyst price target of $313.48 is 4.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.