Now more than ever, investors are searching for reliable stocks with a solid financial history, strong potential for long-term growth, and a decent dividend payout. As was the case with many other stocks in the broader market, Amgen (AMGN -0.19%) fell sharply in March. Shares started moving toward recovery in early April, and are currently lagging just about 7% behind the stock's 52-week high.
The company since reported an 11% increase in revenue in the first quarter of 2020, and projects 2020 revenue to be anywhere from $25 billion to $25.6 billion, which is consistent with its full-year guidance entered before the pandemic started. If you're thinking about buying this stock, here's what you need to know.
Image source: Getty Images.
A product refresh is boosting Amgen's profitability
Not so long ago, increased competition in the biotech space and a portfolio of older medicines were having a significant impact on Amgen's profitability. In Amgen's fourth-quarter 2019 earnings statement, the company reported a 1% decrease in revenue and a full-year revenue decline of 2%. Product sales also decreased by 1% in 2019, with cash flow for the full year down by $2.1 billion compared to 2018.
However, with the release of several newer medicines and a burgeoning pipeline, the company's revenue has seen a notable spike. When the company reported its Q4 2019 earnings and 2020 revenue guidance at the end of January, Amgen's chairman and Chief Executive Officer Robert A. Bradway commented: "We are entering a period of new product driven revenue growth. Heading into 2020, our capital allocation priorities are clear, and we look forward to several important clinical data readouts from our innovative pipeline this year."
When Amgen reported its earnings for the first quarter of 2020 at the end of April, the company's financial performance indeed looked vastly different than in the previous quarter. On top of the company's overall 11% year-over-year revenue increase in the first quarter, global product sales were up by 12%, propelled by an impressive 15% in volume growth. Amgen's free cash flow in the first quarter of 2020 was also up from Q1 2019, totaling $2 billion compared to the $1.7 billion reported the year prior.
Much of this spike in revenue and cash flow can be traced back to several of Amgen's newer core products. One of the big game changers for Amgen was Otezla, a drug that treats moderate to severe plaque psoriasis. Amgen completed its acquisition of Celgene's Otezla in November 2019 in a $13.4 billion deal. This blockbuster drug looks to be a game changer for Amgen, having raked in $479 million in sales in the first three months of 2020 alone.
Other key revenue drivers for Amgen in the first quarter were newer drugs Repatha, which is used to treat patients with high cholesterol, and bone drug Evenity. Sales of Repatha were up 62% in Q1 2020, totaling $229 million. Evenity was just recently released in U.S. and Japanese markets in early 2019, and was responsible for $100 million of Amgen's sales in Q1. In addition to its updated portfolio of products, the company's revenue boost was also attributed to an overall increase in demand in the first three months of the year.
A promising pipeline
Amgen also has some encouraging pipeline programs. The company anticipates the Food and Drug Administration to enter a regulatory decision about the potential expansion of its prescription information for multiple myeloma medication Kyprolis by the middle of November.
On May 8, Amgen said the FDA had issued a Fast Track designation for investigational drug Omecamtiv mecarbil, which the company is developing in partnership with Cytokinetics (CYTK 1.91%). Omecamtiv mecarbil is being evaluated as a possible treatment for heart failure patients with low left ventricular systolic function. The drug is currently being studied in a massive phase 3 clinical trial involving more than 8,000 patients in 35 countries, with results anticipated for release in Q4.
The heart failure drug market is anticipated to hit an astonishing valuation of about $16 billion by 2026. A close competitor in the heart failure drug space, should Omecamtiv mecarbil gain approval, is Novartis' (NVS 1.10%) Entresto, which brought $569 million in revenue for the company in the first quarter of 2020 alone. It's safe to say that if Omecamtiv mecarbil makes it to the market, Amgen could have another blockbuster like Otezla on its hands.
News on the COVID-19 front
Amgen has contributed to ongoing efforts in the pharmaceutical sector to study and develop potential COVID-19 treatments in several different ways. The company is taking part in the Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) collaboration spearheaded by The National Institutes of Health and the Foundation of the National Institutes of Health.
Amgen also announced in April that it is working with Adaptive Biotechnologies (ADPT 0.78%) to develop antibody treatments for the novel coronavirus. Additionally, Amgen is investigating Otezla as a possible immunomodulatory therapy for coronavirus patients. Investors should watch for further updates as Amgen continues its evaluation of Otezla, which to date has been approved in over 50 countries to treat various inflammatory illnesses.
Image source: YCharts.
To buy or not to buy?
While it's been a bumpy few years for Amgen, this stock is looking like a promising buy at the moment for a few reasons. The company has made a concerted effort to expand its product portfolio in recent years, and the impact on its top and bottom lines is finally starting to show. Shares have made a nice recovery since the bear market dip in March, and the company looks to build on a strong momentum from its excellent first-quarter results. While Amgen's conservative 2.82% dividend yield won't make you rich quick, investors with a long-term buying perspective should take a second look at this stock.
