In the biotech investment landscape, Amgen Inc. (NASDAQ:AMGN) stands out as an intriguing option, boasting a dividend yield slightly above 3% and a commendable track record of consistent growth over the past 12 years. With its leading mid-stage development drug MariTide, targeting obesity, the company positions itself for potential future expansion and innovation within the biotech domain.
Amgen, valued at $144.8 billion, is a major player in the biopharmaceutical sector with a diverse drug portfolio encompassing blood disorders, immunology, bone health, oncology, pulmonology, and an expanding biosimilar portfolio.
Over recent years, Amgen has proven to be a resilient stock. Starting at around $220 per share in early 2022, it reached an all-time high of approximately $330 in January 2024. Despite these gains, Amgen shares have experienced a 6.26% decline year-to-date, trailing the 6.92% return of the S&P 500 Index ($SPX) during the same period.
Recent Developments for AMGN Stock
On April 26, Amgen revealed its intention to submit a Marketing Authorization Application to the European Medicines Agency for teprotumumab, a fully human monoclonal antibody targeting the insulin-like growth factor-1 receptor, aimed at treating moderate to severe Thyroid Eye Disease in adults.
On April 15, TD Cowen revised its price target for Amgen to $360 from $370, maintaining a “Buy” rating. The adjustment came before Q1 earnings, incorporating sales/scrip trackers and aligning estimates with Q1 and 2024 sales and operating expenses guidance.
On March 1, Goldman Sachs (NYSE:GS) upgraded Amgen to “Conviction Buy” from “Buy” with a $350 price target. An analyst at Goldman Sachs highlighted Amgen’s potential to seize multi-billion dollar opportunities by leveraging a robust pipeline of drugs currently under development, with several expected to undergo key clinical trial read-outs in 2024.
Obesity Drug Market
Amgen is actively developing MariTide (formerly AMG133), an injectable weight-loss treatment showing promise in helping patients maintain weight loss even after discontinuing injections. Preliminary trial results suggest MariTide may outperform existing market treatments in this regard. Additionally, Amgen is exploring a once-a-month injection regimen, offering a more convenient option compared to current weekly injections. Furthermore, the company is developing an oral weight-loss treatment to cater to patients who cannot tolerate injections.
Updates from phase 2 clinical trials on MariTide, along with phase 1 findings on Amgen’s obesity pill, are expected later this year, potentially serving as significant catalysts for the stock.
Earnings Preview for Amgen
Amgen reported its earnings for the fourth quarter on Feb. 6, delivering a year-over-year revenue increase of 19.9% to $8.2 billion, surpassing consensus estimates by $90 million. Notably, a significant portion of this growth stemmed from the completion of the Horizon Therapeutics acquisition.
For the first quarter, analysts predict Amgen’s earnings to decrease by 5.53% year-over-year to $3.76 per share, while FQ1 revenue is anticipated to rise by 22.15% year-over-year to $7.46 billion. Amgen is scheduled to announce its March quarter earnings on May 2.
Valuation and Dividend Yield
Amgen’s current valuations appear attractive, with a 2024 price-to-earnings multiple of 13.82x, below its five-year average of 14.16x, and the sector’s median of 19.40x. Additionally, AMGN offers an appealing 3.33% dividend yield, backed by 12 consecutive years of dividend growth and a 5-year dividend CAGR of 9.82%.
Risks and Market Sentiment
Risks facing Amgen include an increase in its net debt balance, impacting interest expenses, as well as the uncertainties surrounding new drug development and negotiations regarding Medicare prices.
Analyzing the options market sentiment, the put-call ratio at the $270.00 strike price suggests a stronger preference for put options, potentially signaling anticipated downward pressure on the stock price.
Analyst Recommendations
Out of 25 analysts covering AMGN stock, 11 recommend “Strong Buy,” one recommends “Moderate Buy,” three rate it as “Strong Sell,” while the remaining 10 rate it as “Hold.” The mean target price for AMGN stock is $303.45, representing a 12.4% increase from Friday’s closing price.
Final Thoughts on AMGN
Despite its compelling valuation and solid dividend yield, investors should remain cautious for now. The options market indicates potential short-term pressure on the stock. Therefore, investors may want to adopt a wait-and-see approach, evaluating Amgen’s ability to balance dividend payments, debt reduction, and growth opportunities.
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