What: Shares of Amgen (NASDAQ:AMGN), the original biotech blue-chip and a global developer of game-changing therapeutics, surged 13% in July, according to data from S&P Global Market Intelligence. Amgen's strong results can be traced to four key catalysts.
So what: The first catalyst, though superficial, is that biotech stocks as a whole outperformed during July following an early year swoon. The S&P 500 gained less than 4% in the month of July, but the S&P SPDR Biotech ETF leaped just shy of 15%. This gave Amgen quite the boost in July.
Beyond this superficial bump, Amgen also benefited from another strong earnings report. For the second quarter, Amgen reported revenue growth of 6% to $5.69 billion and adjusted profit growth of 11% to $2.84 per share. Higher demand for key therapeutics and operating margin expansion tied to its extensive cost cuts propelled Amgen's EPS higher. The company also increased its full-year guidance to a range of $22.5 billion to $22.8 billion in sales and $11.10 to $11.40 in adjusted EPS. Comparatively, Wall Street had been looking for $110 million less in Q2 sales, and just $2.74 in adjusted quarterly EPS.
The third and fourth catalysts were wholly related to Amgen's developing pipeline. First, on July 21, Amgen and UCB announced the submission of a biologics license application to the Food and Drug Administration for romosozumab as a treatment for osteoporosis in postmenopausal women at risk for fracture. This filing moves romosozumab one step closer to potentially generating revenue for Amgen, though the drug will admittedly face stiff competition from Radius Health within the space.
Lastly, Amgen and Allergan announced positive top-line data from a phase 3 trial of ABP 980, a biosimilar of cancer drug Herceptin in patients with HER2+ early breast cancer. The study ruled out inferiority to Herceptin, but did not rule out superiority, which is a good sign. The data should put ABP 980 on track for a regulatory filing in the near future.
Now what: Though Amgen tends to be tied at the hip to the movements of the biotech sector as a whole, it's really a standout among its peers.
The company's second-quarter earnings results showed strong growth for cancer drug Kyprolis and osteoporosis drug Prolia, which grew sales by 45% and 30%, respectively, all while pushing research and development costs down by 7% to $900 million from the prior-year quarter. Amgen has a strong late-stage pipeline that could still yield, including its biosimilar program, around a dozen new drug launches in the coming years. In other words, Amgen appears well on its way to sustained growth and operating margins in excess of 50%.
Best of all, Amgen is among the top dividend companies in the healthcare industry. Having initiated a $0.28 per quarter dividend in 2011, Amgen is now paying an even $1 per quarter. That's an annual dividend growth rate of nearly 30%, and a yield of 2.3%.
Amgen's current PEG of 1.8 implies that the company is probably appropriately valued for the time being, but that could easily change as new drugs hit pharmacy shelves. In short, Amgen still looks to be an intriguing stock to consider for the long-term.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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