Biotechnology stocks are famous for dramatic price movements but smart investors have been eager to scoop up shares of Amgen (NASDAQ:AMGN) for a different reason. Despite a development pipeline that few analysts would describe as prolific, investors who have held the stock over the past decade have gained more than 400% once you factor in dividends.

Despite its size, Amgen can move quickly where it matters most. On May 28, 2021, the FDA granted a highly accelerated approval to a new lung cancer therapy in record time. This is why Lumakras could allow this biotech stock to deliver oversized gains for at least another decade. 

Scientist at work in a laborataory.

Image source: Getty Images.

A long time coming?

Scientists have known that mutant KRAS proteins were responsible for aggressive tumor growth for decades, but they aren't easy to manipulate. Once Amgen realized Lumakras could tackle aggressive cancer cases the company turbocharged its development. 

Amgen announced the first human proof-of-concept data for Lumakras in 2019 when it was still known as AMG 510.  Amgen used the FDA's new Orbis pathway to expand and adapt that first trial in a way that satisfied all the necessary criteria for accelerated approval.

Lumakras is the first KRAS inhibitor to earn approval but it isn't the only one in development at the moment. Adagrasib from Mirati Therapeutics (NASDAQ:MRTX) aims for KRAS proteins with the same G12C mutation. Mirati expects to submit an application for accelerated approval before the end of 2021, but the timeline's still a little fuzzy.

Blockbuster potential

With a head start on the competition, Lumakras seems likely to reach a large share of the available pool of KRAS-positive patients before Mirati Therapeutics has a chance to launch a competing drug. Oncologists have noticed KRAS G12C activity in around 14% of all cases of non-small-cell lung cancer (NSCLC) and 3% to 4% of colon cancer cases.

Less cigarette smoking and more early screening have lowered the risk of death from lung cancer a great deal, but roughly 6% of Americans will be diagnosed with lung cancer at some point in their lives. Since most cases aren't discovered until advanced stages, only around one in five patients survive more than five years after receiving their first lung cancer diagnosis. 

In the study supporting its accelerated approval, Lumakras shrank tumors for 36% of KRAS-G12C positive NSCLC patients. These were patients with tumors that continued growing despite treatment with standard care, so eliciting responses from more than a third is impressive. 

To help oncologists discern which patients might benefit from Lumakras, the FDA also approved a blood-based diagnostic from Guardant Health (NASDAQ:GH). This means new patients won't necessarily need a biopsy to begin treatment with Lumakras.

Oncologist speaking with a cancer patient.

Image source: Getty Images.

What's next

At the moment, Lumakras is approved to treat NSCLC patients who have already relapsed or failed to respond to their first course of treatment. This is an important population but it isn't nearly as large as the pool of newly diagnosed patients who tend to remain on treatment much longer. With a list price of around $18,000 per month, an expansion to the first-line setting could lead to a revenue explosion for Amgen.

To see what could be in store for Lumakras, we can look at AstraZeneca's (NASDAQ:AZN) experience with Tagrisso a targeted treatment for NSCLC patients with EGFR mutations. Although first approved for a second-line setting about six years ago, a subsequent approval to treat first-line patients in 2019 pushed Tagrisso sales up to $4.3 billion last year.

We'll know more about Lumakras' future before too long. Amgen has already completed enrollment into a phase 3 study that compares Lumakras to standard chemotherapy.

Time to buy?

Shares of Amgen offer a juicy 4% dividend yield at the moment, and you'll get to keep those payments whether Lumakras goes on to become a mega-blockbuster or not. 

Before you buy any shares of this biotech, you should know that sagging sales of older drugs and pandemic-related pressure pushed first-quarter earnings about 12% lower year over year. This is a big reason Amgen shares have been trading at the low multiple of 14.7 times forward earnings expectations. 

With Lumakras sales coming online and fewer pandemic-related restrictions to pressure the rest of its cancer-related products, Amgen shares have what it takes to outperform the broad market in the decade ahead.

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.