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Is Amgen (AMGN) Truly One of the Best Biotech Stocks to Own?

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Amgen AMGN is one of the biggest biotech companies in the world, with a strong presence in various therapeutic areas including oncology.

In 2019, Amgen delivered strong financial results while facing competition from biosimilars and generics. Total product sales decreased 1% as lower net selling prices were offset partially by volume growth. Product sales decreased 5% in the United States and grew 11% in the rest of the world. Total operating expenses increased 2%.

Amgen is also rapidly advancing its pipeline. Key recent FDA approvals were that of Evenity/romosozumab for osteoporosis in postmenopausal women at increased risk for fracture and calcitonin gene-related peptide (CGRP) antibody Aimovig/erenumab for prevention of migraine. Both the drugs are off to strong starts.Amgen also gained approval for several line extensions in 2019 for drugs like Nplate and Blincyto.

Amgen has several interesting candidates in its pipeline, which represent a significant commercial potential. Important late-stage pipeline candidates include tezepelumab (severe asthma) and omecamtiv mecarbil (chronic heart failure). Amgen also has an intriguing lineup of early and mid-stage programs, which can contribute to growth in the long term. Early clinical data on a key candidate, AMG-510, Amgen’s KRAS inhibitor for solid tumor, has shown encouraging anti-tumor activity in patients with locally-advanced or metastatic KRASG12C mutant solid tumors like non-small cell lung cancer (NSCLC), colorectal cancer (CRC) and appendiceal cancer. Amgen also expects several important clinical data readouts from its innovative pipeline in 2020.

Amgen also continues to invest in external opportunities to augment its internal programs and products. In November 2019, Amgen acquired global commercial rights to Celgene’s (now a part of Bristol-Myers BMY) blockbuster psoriasis drug, Otezla. The acquisition significantly strengthened its inflammation portfolio which should boost long-term growth. Amgen expects to grow Otezla sales at a CAGR of low double-digit over the next five years. In January 2020, Amgen bought a 20.5% stake in China’s leading pharma company BeiGene. Per the deal, BeiGene will commercialize Xgeva, Kyprolis, and Blincyto in China while also help advance 20 of Amgen’s oncology pipeline candidates, including AMG 510, in China.

Amgen also has one of the strongest cash position in the biotech sector which could be used to acquire more pipeline assets that could fuel long term growth.

Biosimilar drugs are also a key part of Amgen’s growth strategy. Amgen markets Kanjinti (a biosimilar of Roche’s RHHBY Herceptin) and Mvasi (biosimilar of Roche’s Avastin) in the United States and Amgevita (biosimilar of AbbVie’s (ABBV - Free Report) Humira), Kanjinti and Mvasi outside the United States. Its biosimilars business is already annualizing at over $1 billion in sales. In the United States, Amjevita is expected to be launched in 2023. Amgen expects more biosimilars to gain approval in 2020 and contribute to total revenues.

In 2020, while Amgen’s growth products like Prolia, Evenity, Repatha, Aimovig, Otezla and biosimilars will drive sales, increasing competition for its legacy products will continue to hurt the same. Biosimilars are having a negative impact on mature products like Neupogen and Neulasta in both the United States and EU. Pfizer’s Retacrit, the first biosimilar version of Epogen, was launched in November 2018 and other biosimilar versions of Epogen may also receive approval in the future. Sensipar also lost patent exclusivity in March 2018 and generics have been launched (at-risk). Meanwhile, pricing pressure and stiff competition are hurting sales of Enbrel, one of the main drivers of Amgen’s revenues. The declining trends in Enbrel volumes are expected to continue in 2020.

Importantly, Amgen's net selling price for its drugs fell 5% globally in 2019 and is expected to decline in 2020 at a low to mid-single digit rate.

Conclusion

Amgen has its share of challenges in the form of biosimilar erosion of its legacy products, lower sales of key drugs like Repatha, pricing pressures and pipeline setbacks. However, higher sales of growth products like Prolia, Xgeva, Blincyto and others, increasing contribution from recently launched products including Aimovig and Evenity and biosimilars, cost savings and pipeline progress can be some of reasons to own the stock

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