What happened
Biopharma stock Amgen (AMGN 0.64%) is up 6.4% as of 1:47 p.m. ET Tuesday, according to data from S&P Global Market Intelligence, in response to an upgrade from Morgan Stanley.
So what
It may not be anyone's favorite long-term pick. But given the current market environment, Amgen may be one of an investor's best bets until further notice.
That's the gist of Morgan Stanley's upgrade of Amgen on Tuesday: Analyst Matthew Harrison explained in a note, "We believe Amgen is largely derisked providing defensiveness in this market with upside optionality on growth."
Harrison is particularly optimistic about the company's obesity treatment AMG133. Although it would be years until the drug currently in phase 1 trials might be approved and commercialized, based on its early results thus far, Harrison suggests it has the potential to drive billions of dollars in annual sales. The eventual approval of AMG133 means Amgen is "best positioned to capture outsized market share" of an obesity a market that Morgan Stanley estimates worth more than $50 billion, while the expected early-2023 launch of arthritis drug adalimumab in the meantime promises a more immediate impact.
Conversely, Harrison acknowledges the company will face stiff impending competition of its own, particularly between 2025 and 2030.
Still, along with the upgrade, Morgan Stanley raised its price target for Amgen from $257 to $297.
Now what
Any upgrade (or downgrade) rooted in one drug's potential -- or even several drugs' potential -- should be taken with a grain of salt. The biopharma arena is forever in flux, and any of its companies are one failed trial or one competitor's success away from trouble. They're also just plain volatile. Amgen is no exception to this reality, even with Amgen's seemingly strong obesity prospects and impressive pharma pedigree. Be wary if you're expecting bullish follow-through immediately following today's action.
Harrison is certainly right about one thing, though. That is, biotech and biopharma stocks tend to perform better than the broad market when the economy is on less-than-firm footing. These businesses tend to operate outside of normal economic cycles, offering investors reliable performance when most other stocks are struggling.
If that's what you're looking for here, Amgen isn't a bad bet.
