What’s Behind The 50% Rise In Amgen Inventory?

Amgen stock (NASDAQ: AMGN) noticed a 7% fall on Tuesday, November 12, after an replace on the progress with its weight-loss drug — MariTide. An early-stage trial for the drug confirmed lack of bone density, which might be a possible security threat. MariTide is a crucial experimental remedy for Amgen. Earlier this yr, the corporate determined to scrap its weight problems capsule however transfer ahead with an injection, and Amgen’s administration appears glad with the outcomes thus far. The corporate is planning for a late-stage medical trial of its weight-loss injection. Amgen’s injection might stand out regardless of rising competitors within the weight-loss remedy market, on condition that the injection might assist sufferers cease gaining weight even after they discontinue the remedy.

Though the current replace didn’t bode properly with the traders, we expect that the autumn seems to be stretched. The bone density loss is a recognized facet impact of weight reduction medicine, and it appears to be various per the dosage for Amgen. Barring the current decline, AMGN inventory has fared properly, with round 50% beneficial properties since early 2021, in comparison with roughly 30% development for the broader S&P500 Healthcare index. This may primarily be attributed to:

1. a 13% rise within the firm’s P/S ratio to 5.2x now, versus 4.6x in 2020;
2. a 22% rise within the firm’s income from $25 billion to $31 billion over the identical interval; and
3. a 7% discount in its share depend because of $15 billion in share repurchases.

Amgen’s revenue development is being pushed by its comparatively new medicine, together with, Repatha, Evenity, Blincyto, and Tezspire, amongst others. The corporate’s acquisition of Horizon Therapeutics can also be bolstering the top-line development. Amgen launched a biosimilar — Amjevita — for AbbVie’s Humira, which is predicted to contribute over $1 billion in annual gross sales. On the flip facet, a few of the firm’s older medicine, similar to Enbrel and Neulasta, are seeing a y-o-y decline in gross sales.

Amgen’s gross margin has declined from 75.8% in 2020 to 60.5% now. Trying on the firm’s steadiness sheet, its complete debt has elevated meaningfully from $33 billion to $60 billion, whereas its money in hand has declined from $11 billion to $9 billion over the identical interval. Given its debt as a share of fairness of 38% and its money as a share of property of round 10%, we expect Amgen seems to be moderately positioned from a monetary threat perspective.

Does AMGN Inventory Have Any Room For Development?

AMGN inventory is up 6% this yr, underperforming the broader markets, with the S&P 500 index rising 26%. Nonetheless, if we take a look at a barely long term, AMGN is one in all a handful of shares which have elevated their worth in every of the final three years. Nonetheless, that wasn’t sufficient for it to constantly beat the market. Returns for the inventory had been 2% in 2021, 20% in 2022, and 13% in 2023.
In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, is much less risky. And it has outperformed the S&P 500 annually over the identical interval. Why is that? As a gaggle, HQ Portfolio shares supplied higher returns with much less threat versus the benchmark index; much less of a roller-coaster experience, as evident in HQ Portfolio efficiency metrics.

Given the present unsure macroeconomic setting round charge cuts and developments across the firm’s pipeline, might AMGN face an analogous scenario because it did in 2021 and 2023 and underperform the S&P over the following 12 months — or will it see a powerful leap? We expect AMGN inventory has a bit room for development. It trades at 5.2x revenues, versus the inventory’s common P/S ratio of 4.9x during the last three years. We expect a slight rise in valuation a number of for AMGN is sensible, given the potential of its pipeline, together with the weight-loss injection – Maritide.

Whereas AMGN inventory seems to be prefer it has some room for development, it’s useful to see how Amgen’s Friends fare on metrics that matter. You can see different priceless comparisons for corporations throughout industries at Peer Comparisons.

[1] Returns as of 11/13/2024
[2] Cumulative complete returns for the reason that finish of 2016

Make investments with Trefis Market-Beating Portfolios
See all Trefis Price Estimates

The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.