Amgen Inc. (NASDAQ:AMGN) is one of those companies that you look at and say to yourself, "This thing has moved up quite a bit during the past year, will it continue to do the same going forward?" Am I right, or am I right? You would be doing yourself a disservice if you don't stay prudent and do some homework on the names in your portfolio. With the last article I wrote about the company, I stated, "Amgen is definitely the neglected child in the biotech industry among investors over the years, but it has been making a significant comeback just within the past year." With that said, I'm going to take a look at the stock right now and see what has happened recently.
Earlier in the month the company received approval for the product responsible to treat patients with B-cell ALL (acute lymphoblastic leukemia), Blincyto. The treatment was approved almost five months ahead of its milestone schedule thanks in large part to its designation as a breakthrough therapy, priority review, and orphan drug designations. The product helps the immune system detect and attack the bad cells in the body. The product was also used for a phase 2 study to test patients with minimal residual disease ALL which was successful. This approval is just evidence that Amgen is turning the corner from having the perception of being a large, stodgy pharma company to actually being a breakthrough biotechnology producing company.
Although Amgen is now considered a biotech company, one of their old products is under pressure from a biosimilar produced by Novartis. Novartis is making a filgrastim biosimilar which will compete with Amgen's Neupogen which will be used for the prevention of severe neutropenia in patients with breast cancer that are also receiving chemotherapy. The problem here is that Neupogen made about $.12 billion for Amgen in the past year. Biosimilars are a much less expensive alternative to the original product, but before it can be released for consumption it must first run through a series of trials much like any other drug, but to show that it is close to identical to the product it is going to compete against. If the Novartis biosimilar is approved it will definitely eat into Amgen's revenue stream.
The company also received approval from the FDA for Xgeva for the treatment of patients with hypercalcemia of malignancy (NASDAQ:HCM) refractory to biphosphate therapy. Xgeva was given the designation of orphan drug for this particular treatment. HCM is a complication of patients in the advanced stages of cancer which can lead to death. It comes from the increase in bone resorption in relation to cancer. Amgen will received seven years free of competition thanks to the designation of being an orphan drug. Given that HCM is occurring in approximately 20% to 30% of cancer patients the potential market opportunity is huge for this product.
The company recently presented at the American Society of Hematology meeting and I really do expect big things from the company in the future. This has definitely been my favorite healthcare stock in the past eighteen months due in large part to the fact that I believe it is a biotech stock which pays a dividend; as opposed to the other biotech stocks like Biogen Idec or Gilead which don't pay a dividend. I haven't bought the stock in quite some time because it has run up too fast in a short amount of time.
On a forward looking basis I believe investors should keep an eye out for the company because it has Kyprolis in the pipeline as a result of the Onyx purchase about a year ago. The company however appears to be fairly valued right now. But I keep reinvesting the dividends and will look at it again closer to the next ex-dividend date in February or if the stock drops to $140 on any pullback.
Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: The author is long AMGN.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.