Amgen, Inc.’s (NASDAQ:AMGN) cholesterol-reducing drug, Repatha, was approved by the FDA last week, nearly a month after it was already approved by European regulators. Repatha will compete with Praluent, another recently-approved drug developed by Sanofi and Regeneron.
Many have been looking forward to this new class of cholesterol-lowering drugs because it will help people lower their cholesterol levels after they have been unable to do so on their own using mild medication. However, many are discussing the cost of the treatment. Amgen will price Repatha at $14,100 per year, just behind competitor Praluent at $14,600 per year.
Analysts agree that there are several pros and cons to investing in Amgen amid the recent market pullback. On the bright side, the company has grown at a reliable pace since its inception, omitting last month’s tumultuous market conditions. However, some investors are worried about generic drugs hitting the market that will cut into Amgen’s profits, resulting in the company relying on fewer drugs for the bulk of its revenue.
Several analysts have weighed in this week with thoughts and concerns about Amgen.
On September 1, Raymond James analyst Christopher Raymond initiated coverage on Amgen with a Neutral rating. Raymond noted the approval for Repatha and estimates its revenue will quickly grow to approximately $49 million in 2015 to $1.17 billion by 2018. Although these sales figures are impressive, Raymond notes it is unlikely that revenue derived from it will offset the loss of revenue from expiring and aging patents. Consequently, Raymond estimates underwhelming single-digit revenue in the future. For fiscal year 2015, the analyst expects the company to post earnings per share of $9.77 on revenue of $21.37 billion. He expects a minor increase for fiscal year 2016, forecasting FY16 EPS of $10.56 on revenue of $21.75 billion.
Raymond remains bullish on the biotechnology sector as a whole, but remains cautious on Amgen. The analyst explains, “We think the path of least resistance in biotech – even in light of last week’s broader market sell-off – remains to the upside, based on a number of factors. That said, we caution investors that this view may not apply universally… Bottom line: We would be selective buyers here.”
Christopher Raymond has rated Amgen 6 times since July 2009, earning an 80% success rate recommending the stock with a +21.3% average return per AMGN rating when measured over one-year and no benchmark.
Similarly on September 2, Bernstein analyst Geoff Porges reiterated a Market Perform rating on Amgen, though the analyst did not provide a price target. Porges contended that although the company may seem “better valued” compared to other biotechnology stocks, there are more attractive purchases such as Gilead and Alexion.
Since Geoff Porges has only rated Amgen once, he does not have a success rate or average return on the stock.
Unlike the other two analysts who are staying on the sidelines, Joshua Schimmer of Piper Jaffray issued a note yesterday in which he highlighted Amgen, along with Celgene and Gilead, as his top large cap choices, noting that the company appears “poised to deliver upside to consensus estimates and outperformance over the next 12 months.” In a broader context, Schimmer notes that since the significant market sell off in August, “sentiment amongst investors is mixed.” The analyst points to “large cap biotech’s attractiveness being based particularly on its relative valuation compared to other growth opportunities.”
Joshua Schimmer has rated Amgen 17 times since October 2009, earnings a 35% success rate recommending the stock with a +4.4% average return per AMGN rating when measured over a one-year horizon and no benchmark.
Out of the 7 analysts polled by TipRanks in the last 3 months, 5 are bullish on Amgen and 2 are bullish. The average 12-month price target on the stock is $187.50, marking a 23% potential upside from where shares last closed.