If a company is able to secure approval for a drug treatment and swipe market share from other drugs, the pharmaceutical industry can be extremely lucrative. This has certainly been the case for Johnson & Johnson's (JNJ 0.67%) Stelara, which generated $9.1 billion in revenue for the company in 2021.
But with the main patent for the drug expiring in 2023 for the U.S. and 2024 in the EU, the drug will soon face competition from biosimilar drugs. Chief among those drugs vying to take sales from Stelara will be Amgen's (AMGN -0.50%) biosimilar drug candidate currently called ABP 654.
But how much of a sales boost could Amgen's biosimilar to Stelara provide for the company? Let's dig into the recent phase 3 clinical trial results for the biosimilar candidate and its potential market to find out.
Encouraging clinical trial results
Biosimilar drugs need to demonstrate that there is minimal difference in safety and efficacy compared to the branded drug. And that's precisely what ABP 654 did when results were reported from its phase 3 clinical trials last month.
Adult patients taking ABP 654 with moderate to severe plaque psoriasis -- an autoimmune condition -- achieved similar improvements in their condition compared to those receiving Stelara. This was based on the patient's pre-treatment psoriasis area severity index (PASI) baselines before and after 12 weeks of treatment with ABP 654 or Stelara. The PASI is a clinical tool that measures the redness, thickness, scaling, and surface area of a plaque psoriasis patient.
And the safety profile of ABP 654 was similar to Stelara, which proves that ABP 654 is as safe as it is effective in treating plaque psoriasis compared to Stelara.
Image source: Getty Images.
Significant annual sales potential
How big of an impact could ABP 654 have for Amgen? First, I will assume that ABP 654 will be able to ultimately seize 15% of Stelara's global dollar volume share at its peak. This would equate to approximately $1.4 billion in sales volume being siphoned from J&J's Stelara.
Even adjusting for the fact that biosimilar drugs are 20% to 30% cheaper, ABP 654 could generate $1 billion in annual peak sales for Amgen. For context, this would be a 3.8% lift compared to the $26.2 billion in sales that analysts are expecting for Amgen in 2022.
My global dollar volume share forecast is based on the following information: ABP 654 is competing against five viable Stelara biosimilars. But unlike its competitors, Amgen has two distinct advantages: As the 11th largest pharma stock in the world, the company's size and scale is unmatched by its field of competition.
Plus, with regulatory submission expected in the fourth quarter of this year, ABP 654 will realistically be the first, second, or third biosimilar on the market. Simply put, a first-mover advantage and unmatched distribution power are the two reasons I believe Amgen's drug will seize the plurality of the Stelara biosimilar market.
Amgen's pipeline is deep
Aside from Amgen's ABP 654, the company has 37 other compounds in different stages of clinical trials. Due to this respectable pipeline and its solid existing drug portfolio, analysts anticipate that Amgen will deliver 7.1% annual earnings growth through the next five years.
Best of all, Amgen isn't unreasonably priced for its quality and growth prospects. The stock's forward price-to-earnings ratio of 14 is only slightly above the pharmaceutical industry average of 13.1.
And with a dividend payout ratio set to be 44% in 2022, Amgen's 3.2% dividend yield is quite safe. This makes it a top dividend stock to buy and hold forever.
