What happened
Shares of biotech blue blood Amgen (AMGN -1.33%) gained a noteworthy 10.5% last month, according to data from S&P Global Market Intelligence. What events provided the spark?
Amgen's stock initially perked up in the first part of the month in response the company's presentations at the American Society of Clinical Oncology meeting, covering the KRAS G12C inhibitor AMG 510, as well as the bi-specific T-cell engager (BiTE) molecules AMG 420 and AMG 212. Toward the middle of the month, its shares got a second boost thanks to Pfizer's unexpected acquisition of cancer specialist Array BioPharma.
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So what
Amgen is in the midst of a long-winded portfolio churn that's weighing heavily on its top line at the moment. In short, the biotech's newer growth products, such as the migraine medicine Aimovig and cholesterol treatment Repatha, simply aren't ramping up quickly enough to fully offset its bevy of fading stars. Keeping with this theme, Amgen's top line is expected to essentially flatline next year due to this wave of patent expirations.
Amgen's early-stage oncology pipeline, though, could turn out to be the saving grace. While AMG 510, AMG 420, and AMG 212 are all in early-stage development, each of these product candidates has the potential to generate blockbuster-level sales in the latter half of the next decade. Investors, in kind, were obviously pleased to hear that each of these experimental cancer medications appears to be on track development-wise.
Pfizer's acquisition of Array BioPharma, on the other hand, fueled speculation on Wall Street that Amgen might be the next big biopharma to engage in M&A. Amgen, after all, has one of the highest cash positions in the industry and the biotech clearly needs new growth products to move past these patent headwinds.
Now what
Amgen is no stranger to the mergers-and-acquisition rumor mill. Wall Street has long expected the company to put its massive cash position to good use, but so far, that expectation has gone unfilled. In other words, investors probably shouldn't buy this top biotech based on the assumption that management is going to have a sudden change of heart on this matter. The biotech could use an infusion of new growth products, but that doesn't mean that a game-changing deal is imminent.
