If you're looking for an investment in the pharmaceutical sector and you don't already own shares of Amgen (AMGN 1.72%), it might be worth considering a purchase. The company's development of highly technological cancer therapies is almost certain to expand over time, and its pipeline is packed with candidates for next-generation medicines. Many of those candidates will likely get their shot at approval by regulators.
So let's see where Amgen -- and its investors -- could be three years from now as there's plenty of evidence suggesting the future looks bright.
NASDAQ: AMGN
Key Data Points
The pipeline could be minting winners left, right, and center
The next three years will be significantly different from the recent past, which will be a relief to shareholders. Over the last three years, Amgen's quarterly operating income crashed by more than 57%, reaching $991 million. Management attributes the decline to higher expenses related to one of its recent acquisitions, so it shouldn't be as much of a future factor.
On the brighter side, quarterly revenue climbed by 14% to arrive at more than $7.4 billion in the first quarter, and there's ample reason to believe that a faster pace of revenue growth is right around the corner.
Aside from its biosimilar medicines, Amgen has 28 programs currently in phase 3 clinical trials. Most of those are investigating whether the company's existing approved medicines might be useful in treating additional illnesses, with only five programs testing molecules that haven't yet been commercialized in any form. Still, there's a lot to like about the late-stage pipeline.
In particular, its program evaluating a therapy called olpasiran could be useful in treating or lowering the risk of atherosclerotic cardiovascular disease (ASCVD) in people who have higher-than-healthy levels of lipoprotein (a). ASCVD is a massive market, and elevated levels of lipoprotein (a) are considered by some cardiologists to be untreatable currently.
The market for lipid-lowering cardiovascular drugs could be worth as much as $42.5 billion annually by 2031, according to Transparency Market Research. So the company could be the first competitor in that market within the next few years, and likely experience outsize rewards as a result.
There's also a notable program currently in phase 2 trials that's seeking an indication for treating obesity. The market for obesity medicines is absolutely gargantuan, and management is already planning on a phase 3 trial for the candidate thanks to favorable mid-stage results. By the middle of 2027 -- or sooner -- that trial may already be concluded, and the company could be petitioning regulators for approval.
As if that weren't enough, there are plenty of other programs, particularly for indications in oncology, that might buoy the top line even further.
Distributions for shareholders will be nice too
Another thing investors should look out for is news of acquisitions. Traditionally, Amgen has derived roughly half its revenue from business development deals, and the other half from its internal research and development (R&D) capabilities. It currently has $9.7 billion in cash and cash equivalents on hand, so buying up promising biotechs or their assets will continue to be a driver for growth as well as positive sentiment about the stock.
Meanwhile, Amgen's investors should continue getting compensated for holding their shares via dividends and share buybacks. Management has set a cap of spending at most $500 million on repurchases in 2024, a decrease from the trailing-12-month total of more than $6.3 billion. However, it's also reasonable to expect that the company will keep gradually hiking its dividend over time.
The main takeaway here is that the Amgen of the near future will almost certainly be a larger business, and it'll still compete in the most lucrative markets with some of the most advanced medicines out there. Furthermore, its massive pipeline and deep pockets should provide multiple opportunities even if some of its clinical trials don't go as planned.
Based on all of the above, the Amgen of 2027 is likely to be a profitable business and a favorable stock to own three years from now.
