Amgen stock (NASDAQ: AMGN) has seen a substantial 23% rise this year, far better than the broader S&P500 index, which is down 16%. However, in the longer term, AMGN stock is up 42% from levels seen in late 2018, slightly underperforming the S&P 500 index, up about 65%.
This 42% growth for AMGN stock since late 2018 can primarily be attributed to 1. a 16% fall in its average total shares outstanding to 534 million, currently led by the company’s share repurchases of $22.5 billion, 2. Amgen’s revenue growth of 11% to $26.3 billion over the last twelve months, compared to $23.7 billion in 2018, and 3. the company’s P/S ratio rising 8.1% to 5.6x trailing revenues, from 5.2x in 2018. Our dashboard on Why Amgen Stock Moved has more details.
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Amgen’s expansion of some of its drugs, including Prolia, Otezla, and Repatha, is driving its revenue growth, while some of the older drugs, such as Enbrel and Neulasta, are seeing a y-o-y decline in sales. Enbrel – rheumatoid arthritis and plaque psoriasis drug, and Amgen’s top-selling product – has seen its sales fall to $4.5 billion in 2021, compared to $5.4 billion in 2017. Although Enbrel’s market exclusivity is still far out (2029), it faces increased competition from AbbVie’s (NYSE: ABBV) Humira and Rinvoq, Pfizer’s (NYSE: PFE) Zeljanz, and Johnson & Johnson’s (NYSE: JNJ) Stelara. Given these factors, Amgen’s sales are expected to grow at a slower pace, with the consensus estimate of $27.1 billion in 2023, reflecting a 5% growth between 2021 and 2023.
Amgen is eyeing inorganic growth to boost its sales and pipeline. It acquired Otezla from Celgene in 2019, and earlier this year, it acquired ChemoCentryx in a $3.7 billion deal, giving it Tavneos – a drug approved for the treatment of anti-neutrophil cytoplasmic antibody-associated (ANCA) vasculitis with potential peak sales of around $2 billion.
This week, Amgen announced its plans to acquire Horizon Therapeutics for $27.8 billion. Horizon has two fast-growing drugs, the thyroid eye disease treatment Tepezza and the gout treatment Krystexxa, with a combined peak sales estimate of over $5 billion. This acquisition will give Amgen ammunition to combat the competition for Enbrel.
Looking at valuation, AMGN stock looks fully priced. At its current level of $277, AMGN is trading at 5.6x forward revenue per share estimate of $49.18, compared to the last three-year average of 5.0x. Although we find AMGN fully valued, any positive development in its pipeline will likely result in even higher levels for Amgen.
While AMGN stock looks appropriately priced, it is helpful to see how Amgen’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Phibro Animal Health vs. Tri Pointe Homes.
|S&P 500 Return||-2%||-16%||78%|
|Trefis Multi-Strategy Portfolio||-2%||-19%||221%|
 Month-to-date and year-to-date as of 12/13/2022
 Cumulative total returns since the end of 2016