Is Amgen Stock Fully Valued After A 17% Rise In A Month?

AMGN: Amgen logo

Amgen stock (NASDAQ: AMGN) has seen a 17% rise in a month, outperforming the broader S&P500 index, up 1%. The recent rise can be attributed to its upbeat Q2 results. The company reported revenues of $7.0 billion, up 6% y-o-y, faring better than the consensus estimate of $6.7 billion. Also, its bottom line of $5.00 on a per share and adjusted basis was comfortably above the $4.46 consensus estimate. Adjusted operating margin contracted about 50 bps to 52.6% in the quarter, partly due to higher R&D costs.

Interestingly, AMGN stock had a Sharpe Ratio of 0.4 since early 2017, which is lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

If we look at the longer term, AMGN stock is up 16% from levels seen in late 2021, faring better than the S&P 500 index, down around 6%. This 16% rise for Amgen stock since late 2021 can be attributed to 1. the company’s P/S ratio expanding 10% to 5.3x revenues vs. 4.8x in 2021, 2. a 3.4% fall in its total shares outstanding to 535 million, and 3. Amgen’s revenue growth of 2,3% to $27 billion over the last twelve months, compared to $26 billion in 2021. This has meant that the company’s revenue per share metric has risen 6% to $49.70 now, compared to $46.90 in 2021—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, Tezspire, 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 – the rheumatoid arthritis and plaque psoriasis drug, is Amgen’s top-selling product. However, the company has seen the drug’s sales fall to $4.1 billion in 2022, compared to $5.4 billion in 2017. Although Enbrel’s market exclusivity is still far out (2029), it faces increased competition from other companies’ drugs, including  AbbVie’s Rinvoq, Pfizer’s Zeljanz, and Johnson & Johnson’s Stelara. Amgen launched a biosimilar – Amjevita – for AbbVie’s Humira. This biosimilar saw a 29% y-o-y growth in sales to $150 million in Q2.

Amgen is eyeing inorganic growth to boost its sales and pipeline. Last year, it acquired ChemoCentryx in a $4 billion deal, giving it Tavneos – a drug approved for the treatment of anti-neutrophil cytoplasmic antibody-associated (ANCA) vasculitis with potential peak sales of a little over $1 billion. Amgen plans to close its $28 billion Horizon Therapeutics acquisition in December this year. 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.

The company expects its 2023 sales to be around $27 billion and adjusted earnings to be $18.30 per share at the mid-point of the provided range. With the Horizon acquisition closing toward the end of this year, Amgen will see a jump in 2024 sales, given that Horizon’s last twelve-month sales were $3.6 billion. Looking at valuation, AMGN stock looks fully priced. At its current level of $262, AMGN is trading at 5.2x sales, compared to its last five-year average of 5.1x. Our Amgen Valuation Ratios Comparison dashboard has more details.

Returns Aug 2023
MTD [1]
YTD [1]
Total [2]
 AMGN Return 12% 0% 79%
 S&P 500 Return -3% 16% 100%
 Trefis Multi-Strategy Portfolio -6% 21% 290%

[1] Month-to-date and year-to-date as of 8/11/2023
[2] Cumulative total returns since the end of 2016

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