After U.S. stock markets closed on Tuesday, Amgen (NASDAQ:AMGN) disappointed investors by missing analyst expectations on the top and bottom lines. First-quarter sales of the company's drugs have been impacted by the COVID-19 pandemic, as repeated outbreaks make it harder for patients with other conditions to seek treatment.

The situation is bad enough that the company lowered adjusted earnings expectations for 2021 to a range of between $9.11 and $10.71 per share, from a previous prediction that ranged between $12.12 and $13.17 per share.

A scientist in white coat and surgicsl mask looks into a microscope.

Image source: Getty Images.

Despite Amgen reporting its ugliest quarter in years, its shares haven't collapsed. Here's why progress with a potential new cancer drug is helping investors stay focused on the long term.

Looking forward to Lumakras

Last December, Amgen submitted an application to the Food and Drug Administration for a potential new lung cancer drug with blockbuster potential. Lumakras, formerly sotorasib, is the first in a new class of treatments -- which target tumors driven by out-of-control KRAS proteins -- to get this far.

Roughly 13% of Americans diagnosed with non-small cell lung cancer have aggressive tumors that harbor the specific KRAS mutation Lumakras is designed to treat. If approved ahead of rival treatments from Mirati Therapeutics (NASDAQ:MRTX), Boehringer Ingelheim, and others, annual Lumakras sales could pass $5 billion annually by 2025.

Further down the road, Lumakras could become Amgen's top-selling drug. That's because tumors that originate in the lung aren't the only ones known to harbor KRAS mutations. Lumakras' target has also been found in tumors that originate in the pancreas and colon. Clinical trials that could expand this drug's addressable patient population are well underway.

Approval around the corner?

The FDA's ongoing priority review is expected to wrap up later this summer, but an approval announcement for Lumakras could come much sooner. Less than a day after announcing disappointing first-quarter earnings results, Amgen told investors it would start a post-marketing study with Lumakras to meet a post-marketing requirement proposed by the FDA. This is the sort of trial that companies run when the agency approves a new cancer drug before there's been enough time to produce long-term outcome data.

In trials supporting Lumakras' application for accelerated approval, it shrank tumors for 37% of advanced-stage lung cancer patients who had already relapsed after previous treatments. Around one-fifth of participants experienced serious side effects, but it doesn't look like safety issues are going to prevent the FDA from making this new drug available to lung cancer patients who have already exhausted their treatment options.

Further ahead

Lumakras is the most advanced KRAS-inhibitor in development at the moment, but it isn't the only one. Adagrasib, from Mirati Therapeutics, shrank tumors for 45% of lung cancer patients in a relatively small clinical trial.

Mirati Therapeutics has begun a phase 3 lung cancer trial comparing adagrasib to chemotherapy, but the much smaller company has fewer resources to lean on. Going into 2022, Amgen will most likely have the only approved KRAS inhibitor.

A buy now?

Amgen's shares slid about 7% following its disappointing first-quarter report. The pressure on the stock price, though, has driven its dividend yield up to an even 3% at this writing.

Over the past five years, Amgen has raised its quarterly payout 76%, and the company remains committed to returning profits to shareholders. Despite steady payout raises, the company used just 24% of the free cash flow generated over the past year to make dividend payments, so there's plenty of room to bump it higher.

Amgen is already a giant biopharmaceutical company, so it isn't going to grow by leaps and bounds. With its relatively steady profits, though, you aren't going to lose money holding on to shares of this diversified drugmaker.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.