The European Commission recently approved Amgen's (AMGN -1.33%) Lumykras to treat advanced non-small cell lung cancer (NSCLC) in adult patients with the KRAS G12C mutation whose condition didn't improve after at least one other line of treatment.
What prompted the European Commission to approve Lumykras for lung cancer patients in the EU? And how much will this contribute to pharma stock Amgen's revenue? Let's dig into the clinical trial results for Lumykras and the market for this type of lung cancer to answer these questions.
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A groundbreaking treatment for a deadly condition
To understand KRAS G12C-mutated advanced NSCLC, let's break these terms down one by one.
According to Yale Medicine, NSCLC is the most common type of lung cancer, accounting for approximately 85% of lung cancer cases. NSCLC usually spreads more slowly than the other type of lung cancer known as small cell lung cancer. NSCLC disease cases can then be further classified as either the more aggressive type called squamous (30% of cases) or non-squamous (70% of cases).
The KRAS G12C mutation is the most common mutation in NSCLC with about 13% of non-squamous NSCLC patients having this type of lung cancer. Approximately 40% of NSCLC cases will have spread or metastasized beyond the lungs by the time of diagnosis. This is referred to as advanced NSCLC.
The symptoms of NSCLC include a persistent cough, chest pain, and fatigue. Unfortunately, many cases of NSCLC don't present with symptoms until the cancer has become advanced. This is why just 7% of patients with metastatic or advanced disease are alive five years after diagnosis, according to Amgen.
The good news for patients with this type of lung cancer is that Amgen's targeted therapy named Lumykras/Lumakras (depending on the market) is being approved in more areas around the world. Lumykras has the potential to change the lives of many patients in the EU for the better.
The results from Amgen's phase 2 clinical trial last June proved this to be the case. Amgen enrolled 124 patients who didn't experience significant benefit while taking chemotherapy and/or immunotherapy. In other words, these patients were left with essentially no other treatment options. These patients received 960 milligrams of orally administered Lumykras once each day.
The result is that the drug was found to have an objective response rate of 37.1% in clinical trials. The objective response rate is the proportion of patients taking a treatment whose cancer shrinks or disappears (goes into remission) after treatment. This is huge considering that until recently, KRAS G12C-mutated advanced NSCLC patients had nowhere to turn if immunotherapy and chemotherapy weren't successful.
Amgen will see a slight revenue bump
Lumykras looks to be an impactful treatment for patients. But what will this indication in the EU mean for Amgen's financial results?
First, it's estimated that 318,000 people living in the EU were diagnosed with lung cancer in 2020. Assuming that 85% of these cases are NSCLC, that works out to around 270,000 patients. Breaking it down further, 70% (or 189,000 of these patients) have non-squamous NSCLC. Next, 13% (or 25,000 of non-squamous NSCLC patients) are thought to have the KRAS G12C mutation. Finally, 40% of these patients are likely to be in the advanced or metastatic stage of disease progression at diagnosis. This conservatively equates to a patient pool of 10,000.
Since Lumykras is the first and only targeted therapy that is proven effective for this condition, I'm going to assume that the drug can capture 50% of the patient pool, or 5,000 patients. Next, the annual list price of Lumakras (the name in the U.S.) is $215,000. Drugs in the EU are roughly 50% cheaper, so I'll assume an annual list price of $105,000 in the EU. And because health insurers negotiate cheaper drug prices for themselves and customers, I'll use an annual net price of $60,000 per patient.
These factors lead to an annual sales potential of $300 million for Lumykras in the EU. This isn't much compared to the $27.1 billion in total revenue that analysts are expecting for Amgen in 2022. But recent approvals in other major markets like the U.S. and Great Britain should help catapult Lumykras to blockbuster status for Amgen in due time.
Market-beating yield at a reasonable valuation
Amgen offers investors a market-topping 3.5% dividend yield. Based on the stock's low dividend payout ratio and the fact that analysts are forecasting 6% annual earnings growth in the next five years, Amgen should continue delivering at least high single-digit dividend hikes for the foreseeable future.
Plus, income investors can snatch up shares of Amgen at a current year price-to-earnings ratio of 12.4. All of this makes the stock an attractive buy.
