Case Study: Amgen (AMGN) stock according to high performing analysts
Key Points
Performance
Amgen shares fell by 4.15% this week, pushing their year-to-date losses down up to -14.61%. This compares poorly to the S&P 500, which is up by 9.62% on a year-to-date basis. It also compares poorly to the Healthcare sector as a whole, which is down by -3.60% on the year.
Event & Impact
The Federal Trade Commission announced this week that it is opposing Amgen’s proposed $27.8 billion acquisition of Horizon Pharmaceuticals.
Noteworthy News:
Amgen faces significant patent cliffs on its largest drugs, and historically, it has used M&A to replace these lost sales and increase the growth potential of its drug pipeline. If the FTC begins to crack down on biotech M&A, large biopharma companies like Amgen could face significant growth hurdles.
Nobias Insights
78% of recent articles published by credible authors focused on Amgen shares offer a “bullish” bias. Two out of the three credible Wall Street analysts who cover AMGN believe that shares are likely to rise in value. The average price target being applied to Amgen by credible analysts is $255.67, implying an upside potential of approximately 14.4% relative to the current share price of $223.42.
Bullish Take Nobias 4-star rated author, Lee Jackson, said, “This biotech giant remains a safer way to play the massive potential growth in biosimilars.”
Bearish Take Alex Phillippidis, a Nobias 4-star rated author, stated, “The U.S. The Federal Trade Commission (FTC) announced Tuesday that it will oppose the Amgen-Horizon deal on grounds that it will stifle innovation and the development of new drugs.”
AMGN May 2023
This week news broke that the Federal Trade Commission (FTC) announced that it was opposing Amgen’s proposed acquisition of Horizon Pharmaceuticals (HZNP). This puts the $27.8 billion deal in jeopardy and brings up questions about Amgen’s drug pipeline and ability to overcome upcoming patent cliffs.
Amgen shares have been struggling throughout 2023 thus far and this news doesn’t help the stock’s growth outlook. Amgen shares fell by 4.15% this week in the aftermath of the FTC news. On a year-to-date basis, AMGN shares are down by 14.61%. This compares poorly to the S&P 500, which is up by 9.62% during 2023 thus far, and the Healthcare sector overall, which is down by -3.6% on the year.
Bullish Nobias Credible Analysts’ Opinions:
Despite the stock’s recent downfall, Nobias 4-star rated author, Lee Jackson, recently highlighted Amgen as a “Strong Buy” dividend stock in an article that he published at 24/7 Wall Street. Jackson wrote, “Amgen Inc. discovers, develops, manufactures, and delivers human therapeutics worldwide.”
“It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience,” he continued. Jackson also noted, “This biotech giant remains a safer way to play the massive potential growth in biosimilars.”
Lastly, he highlighted the company’s drug portfolio, stating, “The company’s products include:
Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
Neulasta reduces the chance of infection due to a low white blood cell count in patients with cancer
Prolia to treat postmenopausal women with osteoporosis
Xgeva for skeletal-related events prevention
Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
Aranesp to treat a lower-than-normal number of red blood cells and anemia
Kyprolis to treat patients with relapsed or refractory multiple myeloma
Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization”
Looking at Amgen’s dividend related metrics, investors will see that shares currently yield 3.80%. According to Seeking Alpha, Amgen is on an 11-year annual dividend growth streak. Amgen’s 5-year dividend growth rate is 10.5%.
The stock has a dividend payout ratio of 45.64%. And, Amgen’s most recent dividend increase occurred on December 12th, 2022, when the company announced a 9.8% dividend raise.
Bearish Nobias Credible Analysts Opinions:
However, right now investors don’t appear to be focused on the dividend, but instead, the pressure that the FTC is putting on its Horizon Pharmaceuticals deal.
Alex Phillippidis, a Nobias 4-star rated author, covered the FTC’s complaints in an article published at Genetic Engineering and Biotechnology News. “News that federal regulators will oppose Amgen’s announced $27.8 billion buyout of Horizon Therapeutics began to send Horizon’s shares tailspinning Monday evening into early today,” he said.
Phillippidis continued, “The U.S. The Federal Trade Commission (FTC) announced Tuesday that it will oppose the Amgen-Horizon deal on grounds that it will stifle innovation and the development of new drugs.” This news caused HZPN shares to plummet; they fell more than 15% in response to the FTC headlines and ended up down by 9.67% on the week.
However, as Philippidis points out, the negative outcome may not be terrible for Amgen. In his piece, Phillippidis quoted a research note from Brian P. Skorney, CFA, a senior research analyst with Baird, which stated, “For AMGN stock specifically, we think this was going to be a relatively close to NPV [net present value]-neutral deal anyway, so whether it goes through or not, AMGN shares are unlikely to be materially impacted, in our view.”
Yet, as Phillippidis explained, this deal is important to Amgen’s growth prospects over the long-term. “Amgen’s purchase of Horizon, for example, was driven by its need to replenish its rare autoimmune, and inflammatory disease portfolios as its top-selling drug Enbrel® (etanercept), faces the start of its loss of exclusivity (LoE) on June 8, for patents related to its methods of treatment using aqueous formulations,” he noted.
Large cap bio-pharma stocks have used M&A to replenish their drug pipelines for decades and a harsh stance against mergers by regulators could drastically change how the healthcare sector works. Phillippidis highlighted poor M&A activity in recent quarters, stating, “The number of biotech M&A deals during Q1 fell 27% year-over-year, from the 15 reported a year ago. Deal volume during the first quarter was lower than for any quarter of 2021 or 2022.”
It’s too soon to tell what the ultimate outcome for this deal will be. The drama will be played out in the courtroom, and according to Guggenheim analyst, Michael Schmidt, it’s likely that Amgen prevails.
Jonathan Block, a Nobias 4-star rated author, highlighted Schmidt’s belief that Amgen will win out over regulators in a report published at Seeking Alpha. Block wrote, “Analyst Michael Schmidt said that while the FTC's action provides a "heightened risk of regulatory scrutiny from emboldened regulators willing to test novel theories of antitrust harm," the agency's arguments would need to align with how courts have recently ruled in cases regarding antitrust concerns, and recent precedents don't bode well for the FTC.”
Joe Toppe, a Nobias 4-star rated author, also covered the Amgen/Horizon news this week in an article that he posted at Yahoo Finance. He wrote, “The FTC said in the complaint that Amgen would be able to leverage its position with insurance companies and pharmacy benefit managers wanting access to its blockbuster drugs, while pressuring them into favorable terms for Horizon's two key products – the fast-growing thyroid eye disease treatment Tepezza and gout drug Krystexxa.”
“In response,” Toppe said, “Amgen issued a statement saying it was disappointed by the FTC decision and that it believed it had "overwhelmingly demonstrated" that the deal had no legitimate competitive issues.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
“Meanwhile,” he added, “FTC Bureau of Competition Director Holly Vedova said: "Rampant consolidation in the pharmaceutical industry has given powerful companies a pass to exorbitantly hike prescription drug prices, deny patients access to more affordable generics, and hamstring innovation in life-saving markets."’
Overall bias of Nobias Credible Analysts and Bloggers:
According to the majority of credible authors and analysts that Nobias tracks, Amgen’s recent dip represents a buying opportunity. 78% of recent articles published by credible authors have expressed a “Bullish” bias towards AMGN shares.
Currently two out of the three credible Wall Street analysts who have provided opinions on AMGN shares believe that they’re likely to increase in value.
The average price target being applied to Amgen by these credible analysts is $255.67. Amgen shares trade for $223.42 at the moment, meaning that the credible analyst average price target implies upside potential of approximately 14.4%.
Disclosure: Nicholas Ward is long AMGN. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.