Amgen Shares Are Nearing A Unique Inflection Point

Oppenheimer said Amgen, Inc. AMGN is at an inflection point, driven by growth from replacement products and uniquely positioned to benefit from the emerging field of biosimilars.

Analyst Leah Rush Cann has launched coverage of Amgen with an Outperform rating and price target of $166.

Rush Cann pointed out Amgen’s strong portfolio including:

• Kyprolis.
• Repatha.
• Prolia.
• Xgeva.
• Blincyto.
• Vectibix.
• Nplate.
• Romosozumab.
• Erenumab.
• Biosimilar ABP 798.
• Biosimilar ABP 980.
• Biosimilar ABP 215.

These products are estimated to grow nearly 50 percent of sales by 2020 and would provide a floor against upcoming patent expirations of Epogen, Aranesp, Neupogen, Neulasta, Enbrel and Sensipar.

Analyst's Commentary

“We believe Amgen's expertise in clinical development, manufacturing, legal and regulatory affairs make it uniquely qualified to produce a biosimilar that is FDA-approvable and that is acceptable in clinical practice in the US,” Rush Cann wrote in a note.

Cann expects Amgen’s revenue to grow at a compound annual growth rate of 2.9 percent per year for the next five years, with diluted GAAP EPS growth of 7.4 percent per year.

“We believe Amgen is in a position to have a long growth recovery as mature products decline to a stable level, new products continue to grow, and the pipeline produces additional products,” Cann continued.

Risk/Reward

On the valuation front, Cann said the risk/reward for Amgen is “out of balance,” saying current valuation appears to assign little value to the replacement products and the experimental ones.

Meanwhile, the analyst believes the greatest risk to Amgen’s stock during the next five years is any disruption to the continued success of Repatha, used to treat cardiac disease, and failure of FDA approval of the experimental therapies, Romosozumab for osteoporosis and Erenumab for migraines.

The stock would also be hit from the potential disruptions to the successful launch of biosimilars ABP 798, ABP 980 and ABP 215 for anti-CD20, anti-Her-2 and anti-VEGF, respectively.

At last check, shares of Amgen had risen 2.43 percent on the day to $149.29.