Amgen Inc. (AMGN) is one of the world’s leading independent biotechnology companies with a focus on developing human therapeutic medication for the treatment of cardiovascular, oncology, and neuroscience related diseases. AMGN and Adaptive Biotechnologies (ADPT) announced a strategic partnership in April to develop a therapeutic to prevent or treat COVID-19. AMGN also partnered with AbbVie (ABBV), and Takeda for the development of a potential vaccine.

In September, AMGN announced a global antibody manufacturing alliance to significantly increase the supply capacity available for Eli Lilly and Company’s (LLY) potential COVID-19 drug therapies, including Lilly’s LY-CoV-555. On August 20^th, the company received FDA approval for two of its drugs for the treatment of refractory multiple myeloma. Moreover, AMGN was added to the Dow Jones Industrial Average index later that month.

AMGN has just reported its third-quarter financial results, with record revenue and continuing income growth. Top-line increased 12% year-over-year to $6.4 billion, due to stronger sales of drugs such as osteoporosis treatment Prolia and gene-related peptide medication Aimovig, bucking challenges from lower drug prices and the pandemic. Sales of psoriasis treatment Otezla have also been increasing since AMGN acquired it last November. The company said more patients had resumed interacting with their doctors in the third quarter than earlier during the health crisis, but prescribing volumes remained “modestly below” pre-pandemic levels.

Product sales increased 12% globally, driven by 18% volume growth, year-over-year, across a number of newer products. The company generated $3.2 billion of free cash flow in the quarter, which remained relatively stable compared to the prior year. EPS for the quarter came in at $3.43, improving 5% year-over-year, primarily driven by increased revenues and lower weighted-average shares outstanding as the company repurchased 3 million shares of common stock at a total cost of $752 million during the quarter.

AMGN had $12.4 billion in cash and short-term investments at the end of the quarter, up 38.7% from the same period last year. Research & development expenses increased merely 6% year-over-year. While its current liabilities were reduced 22.5% year-over-year, long-term debt increased from $27 billion last year to $34.3 billion.

Despite robust growth in its operating results and hefty product-line, the stock has lost 8.4% year-to-date. Because of rising competition in the biotech space and a number of other factors, AMGN has a “Neutral” rating in our proprietary ratings system.

Here is how our proprietary POWR Ratings system evaluates AMGN:

Trade Grade: D

AMGN is currently trading lower than its 50-day and 200-day moving averages of $242.67 and $231.82, respectively, indicating that the stock is in a downtrend. In fact, the stock’s 12.9% loss over the past month reflects short-term bearishness.

The stock has been following a downward trajectory as the company has announced no recent updates to its two-pronged approach to coronavirus treatment. In August, the company released some positive clinical trials data for its drug Repatha in treating high-risk cardiovascular (CV) disease patients. However, earlier this month, AMGN and its partner Cytokinetics (CYTK) released mixed results for a final-phase clinical trial after 15 years of investment. It achieved the primary composite efficacy endpoint. However, no reduction in the secondary endpoint of CV death was observed.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, AMGN’s positioning is not favorable. The stock is currently trading 18.3% below its 52-week high of $264.97.

Looking at the past year, the stock is up merely 5.4% regardless of its hefty product-line, with more than 50 programs in clinical testing and more than 20 in phase 3 trials. Revenue grew at a CAGR of only 1.8% over the past three years as competition is hurting sales of older products. Two of the company’s biggest drugs continued to lose market share. Sales of bone-marrow stimulant Neulasta decreased 22% year-over-year in the quarter because of biosimilar competition, and rheumatoid arthritis medication Enbrel sales was down 3% compared to the prior year.

AMGN closed a strategic collaboration with BeiGene (BGNE), investing approximately $2.8 billion to get an ownership of about one-fifth of the Chinese oncology drug company, despite the on-going tension between the two countries. The company contributed an additional $421 million in July 2020 to keep its stake in the Chinese biotech at 20.3%, on par with its previous 20.5% in shares it acquired last year for $2.7 billion.

Peer Grade: B

AMGN is currently rated #55 out of 384 stocks in the Biotech industry. Other popular stocks in the industry are Gilead Sciences, Inc. (GILD), CRISPR Therapeutics AG (CRSP), and Fate Therapeutics, Inc. (FATE). While GILD is down 7% year-to-date, CRSP and FATE have gained 55.5% and 130.1%, respectively, over this period.

Industry Rank: C

The StockNews.com Biotech industry is ranked #61 out of the 123 industries. Companies in the biotech space manufacture drugs, therapies, vaccines, and medical diagnostic tests for the treatment of health disorders and illnesses. The sector has received a lot of attention and hype lately thanks to the COVID-19 pandemic. The outbreak has highlighted the importance of science and technology in advancing the course of treating ailments. However, the industry is considered one of the riskiest for investors as drug development is a difficult, time-consuming and expensive process.

Overall POWR Rating: C (Neutral)

Overall, AMGN is rated “Neutral” despite its impressive quarterly results and aggressively growing product-line because of rising competition, and lack of short-term price momentum, as determined by the four components of our overall POWR Rating.

Bottom Line

The healthcare industry is facing multiple challenges in addition to the pandemic and AMGN is a powerhouse in the biotech industry that has shown significant progress in its ongoing clinical trials. The company is offering a dividend yield of 2.96% and raised its payout by 10.3% this year. However, AMGN’s biggest growth driver is Otezla, a drug the company acquired from Celgene last year. Without Otezla in its lineup, the company’s total revenue would have declined this year.

After the recent failure of Repatha, all eyes now lay on AMGN’s success in the on-going phase 3 trials for different products, especially the experimental KRAS inhibitor, to restrain frontier targets in RAS-addicted cancers, in collaboration with Revolution Medicines (RVMD) and AstraZeneca (AZN). Analyst sentiment, which gives a good sense of a stock’s future price movement, is not impressive for AMGN. Of the 29 analysts that cover the stock, 11 have given it a “Hold.” Thus, some short-term weakness is expected in the near future.

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AMGN shares were trading at $216.16 per share on Thursday morning, down $0.22 (-0.10%). Year-to-date, AMGN has declined -8.48%, versus a 3.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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