bidnessetcnews:
Despite Amgen’s blockbuster
patents nearing expiration, it has the potential to riposte with a competitive
pipeline and drug profile
Amgen is one of
the few pharmaceutical companies to embrace biotechnology for the development
of novel molecules pertaining to rare and life-threatening diseases. Owing to
the development of blockbuster drugs and a number of novel investigational
molecules in the drug pipeline, the company crossed $20 billion in revenue in
2014.
In January
2015, Amgen CEO Robert A Bradway said: “Excitement and momentum are palpable at
Amgen as we focus on genetic validation of high potential biological targets,
next generation biomanufacturing and transformational activities that increases
our agility and help us to deliver new and meaningful medicines to
patients.”
In January
2016, the drugmaker’s cash in hand and equivalents stood at $30 billion. It
plans to utilize the cash to enhance six core therapeutic segments, including the
cardiovascular and neuroscience areas.
A recent
Bloomberg survey of 28 analysts showed half with a Buy rating on Amgen, while
the rest had a Hold call. None had a Sell rating.
Makeover Efforts
The company is
in dire need of novel molecules because older drugs including Enbrel, Neupogen,
Neulasta and Epogen (inflammatory and hematology) face an impending patent
cliff. Increasing competition in the form of biosimilars for blockbuster drugs
Neupogen and Epogen will add to its bucket list of woes.
Xgeva, Prolia,
Kyprolis, Vectibix and Blincyto have more time from their patent expiration
date and therefore have room to become potential growth drivers.
In 2015, Amgen
launched six novel molecules in the US for multiple therapeutic markets. Despite
fierce competition, the drugs are expected to boost sales and profitability in
the near future.
As part of
plans to launch 80 drugs in 2016, the company is in final stages of launching six
drugs corresponding to multiple therapeutic entities, with the rest in
different stages of approval and clinical trials.
Since the
launch of Kyprolis and Repatha in the US this year, analysts have focused on Amgen’s
oncology and cardiovascular portfolios. It has plans to strengthen the bone
health, nephrology, neuroscience, anti-inflammation and biosimilar businesses through
2016.
Cost management
also remains a priority. Amgen is working on speedy product launches and
improving its global reach.
The company is
working to optimize its cost structure to invest more in R&D. Compared to
2015, cost management initiatives have yielded an added $400 million in gross savings
this year.
Growth Drivers
Data from the
Aspire and Endeavor trials has fortified Kyprolis’ position in the multiple myeloma
(MM) market. Amgen says it can utilize data from the Endeavor trial to secure
favorable reimbursement terms from European regulators. Imlygic on the other
hand is yet to secure traction in the oncology market.
Source: Company Filings
In addition to
mature brands including Xgeva, Prolia and Enbrel, Sensipar - a hyperparathyroidism
molecule that generated $5.1 billion in 2015 - is considered to be crucial. The
company’s secondary hyperparathyroidism investigational drug Parsabiv is
expected to gain FDA approval in 2016.
Repatha,
indicated for the treatment of hypercholesterolemia and dyslipidemia, has
witnessed slow but steady growth in the US. Amgen is confident the drug will regain
traction once discomfort regarding its price and side effects profile settles
and patients and physicians start to trust its clinical profile.
Xgeva, Neulasta
and Neupogen witnessed stagnant growth due to fierce competition and patent
expiries. According to Wall Street analysts, Xgeva will touch $1.6 billion in
revenue in 2016, recording a year-over-year (YoY) rise of approximately 12.3%.
After the
patents for Neulasta and Neupogen expired, Amgen’s revenue recorded a gradual
decline. Wall Street analysts predict Neupogen‘s sales to slump 18.6% in
2016.
Source: Company Filings
Humira Biosimilar
Amgen wants to
tackle the challenge from biosimilars with its own copycats. The company
recently gained approval for its biosimilar of AbbVie’s Humira from the FDA’s
Advisory Committee.
The panelists
voted 26-0 in favor of the use of Amgen’s ABP-501 for the treatment of seven
chronic inflammatory conditions, including rheumatoid arthritis and plaque
psoriasis. AbbVie’s Humira generated $14 billion in 2015 and has contributed
more than 60% of its total revenue.
Competitive Pressure
Amgen’s Enbrel
has fallen under the spotlight after the FDA Advisory panel approved its
biosimilar, which Novartis and Sandoz manufactured together. It is already
facing offences from AbbVie’s Humira, Johnson & Johnson’s Remicade and
Novartis’ Cosentyx.
Wall Street still
expects Enbrel to shake off pressure, projecting $5.6 billion in sales in 2016,
growing 5.2% from last year.
Source: Company Filings
Amgen expects
its nephrology molecule Aranesp to rake in $2 billion in 2016, thereby
reflecting a 3.2% YoY increase. Epogen’s contribution is expected to show a YoY
decline of about 32.1%, with $1.3 billion in sales this year.
Source: Company Filings
What Makes Amgen a Buy
Since January
2014, Amgen has been trading at discounted valuations in comparison to
biotechnology peers like Celgene and Biogen.
Amgen is
currently trading at a forward price-to-earnings multiple of 14.2, a
substantial discount of 14% to Celgene, which trades at 16.5 times its 12-month
forward earnings.
Source: Bloomberg
Guidance for 2016
Despite the
looming patent expiries and competition, analysts remain positive on Amgen’s
performance in the third quarter. The company is expected to record net income
at $2.13 billion, a growth of 14.18% YoY. Net income in the same quarter last
year was posted at $1.86 billion.
Solid
performance from the company’s product segments could drive top-line growth
this fiscal year, an expectation also indicated by the revised guidance range
announced in April, which was further increased when Amgen reported earnings
earlier this week.
The range for
revenue guidance was bumped to $22.5 billion - $22.8 billion, up from the
earlier forecasted range of $22.2 billion - $22.6 billion, which earlier stood
at $22 billion - $22.5 billion. The company reported $21.6 billion in revenue
in 2015 and analysts expect the figure to be $22.73 billion this year.
In addition to promising prospects for Amgen’s
top-line, the bottom line is expected to grow as the company looks to implement
cost optimization measures. Amgen expects to report EPS in the $11.10-$11.40
range this year, while the earlier guidance was $10.85-$11.20. Consensus
estimates had come in at $11.32.