Amgen Inc.AMGN

Morningstar Rating

Stock Research and Analysis

by Karen Andersen, CFA

Amgen's blockbuster anemia drugs have been under pressure, and this leading biotech has responded by restructuring operations and squeezing value from other products. With stabilizing sales, a leaner business, and a promising new drug candidate up for Read more

Bulls Say

Amgen has five drugs with annual sales surpassing $1 billion currently on the market, and newer drugs Sensipar and Nplate--as well as pipeline drug denosumab--could easily add to this list of blockbusters.

While Aranesp safety concerns have eroded sales of this blockbuster, Amgen's bottom-line performance has proved resilient, thanks to cost-cutting efforts.

Despite the fact that generic versions of Epogen and Neupogen are entering the market in Europe, the impact so far is muted; Amgen is successfully switching many patients to newer, more potent counterparts Aranesp and Neulasta, whose patents don't expire until roughly 2015.

Marketing strength and a proven ability to commercialize biotechnology-based therapeutics make the company an ideal development partner for smaller biotech firms, potentially giving Amgen a leg up in negotiations for in-licensing new therapeutic candidates.

Amgen's pipeline is starting to bear fruit; the firm received FDA approval of Nplate in 2008 and is poised to bring denosumab to the market in 2010. Read more

Bears Say

Generic versions of Amgen's Epogen and Neupogen are already entering the market in Europe, led by Novartis' NVS Sandoz division. These biosimilars could have a larger impact in years to come, as patents expire and as a regulatory pathway for biosimilars is paved in the U.S.

Recent clinical trial data have brought the safety of the entire ESA class of drugs into question, leading to restricted drug labels, reimbursement cuts, and depressed sales.

Reports from groups like the Government Accountability Office allege that Medicare (which pays more than $2 billion a year for Epogen to treat dialysis patients) encourages overuse of Epogen with its generous reimbursement terms. Epogen (and potential Sensipar) reimbursement will be tied to other dialysis drugs starting in 2011, which could lower use of the drug.

Enbrel is losing market share to new competitors, and several recent midstage disappointments (kidney disease drug AMG 223, asthma drug AMG 317, and arthritis drug AMG 108) only add to the pressure on denosumab's success.

If denosumab fails to achieve commercial success, Amgen could be forced to undertake an expensive acquisition, potentially diluting both its strategic focus and shareholders in the process. Read more

Strategy

Amgen aims to defend its established blockbusters against new competition and introduce novel, market-leading therapies to market. With Aranesp plagued by safety concerns and Neulasta, Neupogen, and Read more

Management

We assign Amgen a Stewardship Grade of D, largely because of the firm's incentive structure and board composition. Amgen's sales and profitability have skyrocketed under the 10-year reign of CEO and chairman Kevin Sharer, and he's been amply rewarded Read more

Profile

Amgen is a leader in biotechnology-based human therapeutics, with historical expertise in renal disease and cancer supportive care products. Flagship drugs include red blood Read more

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Weekly Market Wrap: 1/29/2010
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