Amgen (AMGN 1.11%) ranks as one of the biggest biotechs on the planet. And its stock has richly rewarded investors for years. Since its initial public offering (IPO) in 1983, Amgen shares have skyrocketed more than 49,000%.
But the Amgen of the past isn't the Amgen of today. Is the big biotech stock still a good pick for the long run? Here are three charts that every Amgen investor needs to see.
Image source: Getty Images.
1. Blockbusters losing steam
In 2018, Amgen's product lineup included seven blockbuster drugs. Only three of them generated year-over-year sales growth, though. The fact is that Amgen now has an aging group of top drugs that are losing steam.
Data source: Amgen quarterly reports. Chart by author.
The chart above shows that in its latest quarter, total sales for five of Amgen's top-selling products fell nearly $500 million year over year. But the picture for these drugs is even worse than this chart shows.
Amgen's No. 1 blockbuster, Enbrel, faces increasingly stiffer competition. And that competition could soon pick up even more with AbbVie winning approval from the Food and Drug Administration for psoriasis drug Skyrizi in April, and anticipating another approval for upadacitinib in rheumatoid arthritis later this year.
Neulasta now faces two biosimilar rivals; one launched in July 2018 and another in January 2019. Others could be on the way. Expect sales for Amgen's bone-marrow stimulant to decline at a faster rate in the coming quarters.
A biosimilar to Epogen launched in 2018 Q4, with more biosimilars likely on the way. These products could also weigh on sales of Aranesp, which faces additional competition as well. A generic version of Sensipar hit the U.S. market in December 2018.
The problem for Amgen is that these five drugs combined to generate nearly 63% of the company's total product sales last year. Amgen does have other products that are growing, including osteoporosis drugs Prolia and Xgeva, along with cholesterol drug Repatha, leukemia drug Blincyto, and migraine drug Aimovig. But there's a lot of lost revenue to offset as its big winners of the past begin to fade.
2. What's on the way
Could Amgen get help from its pipeline? Sure. However, the biotech doesn't have as much in late-stage development as it needs, as the chart below shows:
Image source: Amgen.
Three of Amgen's late-stage programs target additional indications for existing drugs Enbrel, Imlygic, and Kyprolis. One of its candidates in late-stage testing that hasn't previously won approval appears to be a long shot: AMG 520 is a BACE inhibitor targeting Alzheimer's disease. So far, every other BACE inhibitor has flopped.
Amgen does have a couple new candidates with blockbuster potential, though: omecantiv mecarbil, for chronic heart disease; and tezepelumab, which is in phase 3 testing for treating asthma, and in phase 2 testing for treating atopic dermatitis. But the real promise for Amgen lies in its early-stage pipeline, which is chock-full of bi-specific T-cell engager (BiTE) therapies targeting various types of cancer. The downsides are that early-stage candidates have higher levels of risk, and are at best several years away from contributing to Amgen's growth.
3. Important in the meantime
The two charts shown earlier might seem a little depressing. However, there's another chart Amgen investors need to see that should be more to their liking:
AMGN Dividend data by YCharts.
Amgen claims one of the fastest-growing dividends in the healthcare sector. Its dividend yield now stands at 3.23%. The company also has "an invisible dividend" -- its share buybacks.
In 2018, Amgen repurchased $17.9 billion of its stock. That's the equivalent of acquiring several small-cap biotechs. Amgen CFO David Meline said on the company's Q1 conference call in April that Amgen spent $3 billion on stock buybacks in the first quarter, and expects to scoop up plenty of additional shares in Q2. The net impact of these buybacks increases the value of existing Amgen shares.
A new Amgen
These charts point to the emergence of a new Amgen. The drugs that have contributed tremendously to the biotech's success so far in the 21st century won't be the ones to carry it into the next decade. Amgen is likely to be more of an income play rather than a growth story for the next few years.
But the company's trajectory could very well change down the road. Amgen's early-stage pipeline has a lot of potential. The company's big cash stockpile of more than $26 billion also gives it plenty of flexibility to add more programs to its pipeline. The charts that tell the tale for Amgen will almost certainly look a lot different five years from now.
