3 Undervalued Amgen Growth Opportunities to Watch

Amgen (NASDAQ: AMGN  ) hasn't put as many eggs into the megablockbuster basket as Merck or Bristol-Myers Squibb, nor has it sought to utterly dominate a therapeutic area the way Biogen Idec may dominate MS. What Amgen does offer, though, is a deep pipeline that goes well beyond the much-discussed PCSK9 cholesterol market. Biosimilar risk is a real threat to the current marketed portfolio, and Amgen does not have much to offer within the hot immuno-oncology sector. Less-appreciated opportunities in psoriasis and migraine could offer upside as analysts start working those into their models, though.

Evolocumab grabbing the airtime
A large percentage of sell-side pieces on Amgen focus on evolocumab, the company's late-stage PCSK9 antibody for cholesterol, and with good reason. Evolocumab could be a $3 billion drug in an $8 billion new class, with upside (and downside) tied to large long-term outcomes studies.

Amgen's data continue to look strong. Five phase III studies (DESCARTES, MENDEL-2, LAPLACE-2, GAUSS-2, RUTHERFORD-2) have shown consistent LDL reductions ranging from about 40% in GAUSS-2 (statin-intolerant pts) to 60% to 70% in monotherapy (MENDEL-2), statin combo (LAPLACE-2), and those with heterozygous familial hypercholesterolemia (RUTHERFORD-2.) Most recently, DESCARTES confirmed that range of LDL reduction with a solid safety profile, including a low incidence of neurocognitive adverse events.

These results look broadly consistent with those seen from Sanofi (NYSE: SNY  ) /Regeneron's alirocumab, though cross-trial comparisons are tricky and Sanofi's trials have enrolled patients with generally higher baseline LDLs. Interestingly, evolocumab seems to be virtually equally effective between monthly and semi-monthly dosing, and that could be a possible point of differentiation with Sanofi/Regeneron's drug.

As a reminder, Pfizer (NYSE: PFE  ) is a little further behind with its drug bococizumab, which is a humanized murine antibody. The Amgen and Sanofi/Regeneron drugs are fully human, and immunogenicity could emerge as an issue for Pfizer's antibody in long-term use.

Not just evo-Kyprolis
I don't want to suggest that evolocumab isn't an important drug; $3 billion is a lot of potential revenue. I simply think that there are other compounds in Amgen's pipeline that should also get a little more consideration and attention.

Kyprolis doesn't lack for attention, as this multiple myeloma drug was a major part of the nearly $10 billion deal for Onyx in 2013. Kyprolis is approved in the U.S. as a third-line option in multiple myeloma, but numerous studies are under way (including CLARION, ASPIRE, and FOCUS) with the goal to gain EU approval and expand into second and/or first-line use in the U.S.

An interim analysis of ASPIRE is coming soon, but CLARION (first-line) results won't be available until 2016-2017. Celgene, Bristol-Myers, and Johnson & Johnson could all be serious rivals with their own pipeline drugs, but successful trial outcomes could pave the way toward more than $3 billion a year in Kyprolis sales.

Not just evo – Bmab and '334
I believe investors should also keep a close eye on AMG827 (brodalumab, "Bmab") and AMG334.

A phase III study of Bmab (AMAGINE-1) showed very strong efficacy for this injected anti-IL-17 receptor antibody. At the 210mg dose, 83% of patients saw 75% clearance (PASI 75) at week 12, versus 72% (placebo-adjusted) for the Novartis IL-17 antibody in phase III and 74% (placebo-adjusted) for Lilly's (NYSE: LLY  ) antibody (phase II results.) Complete clearance was achieved in 42% of Bmab patients (39% for Lilly and 24% for Novartis), suggesting that Amgen has a drug that will be more effective than oral drugs (like Pfizer's and Celgene's) and safer than aTNFs from AbbVie and Johnson & Johnson.

As such, this could be a $2 billion/year drug. Amgen licensed this drug to AstraZeneca and is entitled to a small royalty on sales, as well as a 50/50 split on commercialization profits.

Turning to AMG334, this CGRP antibody is still early in its development (its in a phase IIb study), but it could represent the first highly effective and safe prophylactic therapy for migraine. About 3 million Americans suffer chronic migraines and another 11 million have episodic migraines. Allergan's Botox offers limited long-term relief and only about 20% of those taking triptans see 24-hour relief (and long-term use is generally contraindicated.)

Lilly is working on a similar antibody and early stage results showed a 70% responder rate (50% reduction in monthly migraine days) versus 45% for the placebo group. One-third of those getting Lilly's drug reported a 100% reduction in migraine days, double the placebo rate.  While these high placebo response rates are a threat, the market potential here for Amgen could be equal to the PCKS9 cholesterol opportunity, but it appears in few sell-side models (even with a high risk adjustment to reflect its early stage position.)

The bottom line
Amgen still isn't cheap enough for me to be table-pounding bullish, even though the shares have declined a bit from my last piece (when I thought the valuation was a little problematic). It's getting closer to a potential entry point, though, and investors who are more bullish on the likelihood that Amgen will withstand competition from biosimilars – which, in the U.S., has been a lot of light and very little heat – may find more upside here today.

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