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Amgen (AMGN) Completes Otezla Buyout, Raises 2019 Guidance

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Amgen Inc. AMGN announced that it has completed the previously-announced acquisition of Celgene’s blockbuster psoriasis drug Otezla, which the latter had to divest in order to complete its merger with Bristol-Myers BMY.

We remind investors that Amgen agreed to acquire the global commercial rights to Otezla in August.

Amgen had to pay Celgene $13.4 billion in cash or approximately $11.2 billion net of anticipated future cash tax benefits for Otezla and certain related assets and liabilities. Following this buyout, the company raised its overall guidance for 2019.

Amgen now expects total revenues in the range of $23.1-$23.3 billion, previously expected within $22.8-$23.0 billion. Adjusted EPS is expected in the band of $14.5 -$14.7 compared with the previous range of $14.20-14.45.

Otezla is approved to treat psoriasis, psoriatic arthritis and oral ulcers associated with Behçet's disease. The drug recorded sales of $1.4 billion during the first nine months of 2019 and has been one of the key revenue drivers for Celgene. Otezla performed well in the United States on the back of higher demand and internationally, owing to steady expansion in the key markets.

Amgen’s guidance lift is a pure indication that the Otezla purchase is a smart strategic move by the company as it strengthens its existing inflammation franchise portfolio, which includes a blockbuster drug Enbrel. Notably, Pfizer (PFE - Free Report) markets Enbrel outside the United States and Canada.

However, pricing pressure and stiff competition are hurting sales of Enbrel. As a result, Otzela will strengthen Amgen’s portfolio of inflammatory drugs. Amgen expects Otezla to record at least low double-digit sales growth, on average, over the next five years. Notably, Otezla enjoys U.S. patent exclusivity through at least 2028.

Shares of Amgen were up 1% following this news on Thursday. In fact, the stock has rallied 17% so far this year compared with the industry’s rise of 4.7%.


Please note, Bristol-Myers closed the long impending acquisition of Celgene for a whopping $74 billion on Nov 20 after the U.S. Federal Trade Commission (FTC) permitted to close the merger late last week.

Zacks Rank & Key Pick

Amgen currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the biotech sector is Vertex Pharmaceuticals Incorporated VRTX, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex’s earnings estimates have been revised 5% upward for 2019 and 10% for 2020 over the past 60 days. The stock has surged 30.1% so far this year.

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