Biotech companies must develop new medicines to remain successful since older ones eventually encounter patent cliffs and face generic or biosimilar competition. However, launching new drugs is no guarantee of success. Many therapies aren't nearly as successful as hoped.
Biotech giant Amgen (AMGN +1.69%) has had a harsh reminder of that reality in recent years. Some of its most recent brand-new launches, especially the cancer drug Lumakras, have made paltry (at best) contributions to its top line, while some of its legacy products are racking up declining sales.
Amgen does have a plan to turn things around, though. Can the drugmaker be successful? Let's find out how things could evolve for the company through the next half-decade.
Going after a lucrative market
Amgen's October 2023 acquisition of Horizon Therapeutics for $28 billion in cash could pay off through the next five years. The most important asset it got from that transaction is Tepezza, a treatment for thyroid eye disease (TED). Tepezza is the first and only TED treatment approved by the U.S. Food and Drug Administration (FDA). It first hit the market in 2020.
However, the medicine wasn't reaching its full potential, partly because of pandemic-related disruptions to its launch. With the backing of Amgen, which has deeper pockets and can afford much more comprehensive marketing efforts, Tepezza could perform much better than before. It has also been (or is in the process of) earning approvals abroad, including in Europe, Brazil, Japan, Canada, and Australia.
Amgen sees a significant opportunity in international markets. Management thinks these launches abroad will start impacting revenue growth next year.
NASDAQ: AMGN
Key Data Points
Amgen is also dipping its toes in the fast-growing weight loss market -- arguably the hottest therapeutic area in the industry.
Its most advanced candidate, MariTide, is in a phase 2 study. This medicine succeeded in phase 1 studies, leading to statistically significant weight loss. Further, patients were able to keep the weight off for up to 150 days after the end of the treatment period. Some claim that the current leaders in the weight loss markets are not effective in that regard. MariTide looks promising because there is some early evidence that it could address this issue.
Amgen is planning another phase 2 study for MariTide in treating diabetes. It is also working on late-stage trials for the medicine across various indications. MariTide has blockbuster potential if you believe in analyst projections. Research company Evaluate Pharma estimates MariTide could generate $2.1 billion in revenue by 2030. So, it could be the most important launch for Amgen in the next five years.
Beyond MariTide, Amgen has a rich pipeline with more than 30 phase 3 programs. Some are for existing medicines seeking label expansions, such as Lumakras and Amjevita, a rheumatoid arthritis medicine. Some are biosimilars for billion-dollar products that should lose patent exclusivity soon, including Bristol Myers Squibb's cancer drug Opdivo.
Others are Amgen's own brand-new therapies, such as dazodalibep, a potential treatment for a disease called Sjögren's syndrome in phase 3 studies. This rare autoimmune condition causes various symptoms, such as dry eyes and mouth. There are no FDA-approved treatments for it. Amgen should earn at least several important approvals in the next five years.
Is Amgen stock a buy?
Amgen's organic revenue hasn't been growing particularly fast recently. In the second quarter, the company's top line grew 20% year over year to $8.4 billion, a performance it owed to its acquisition of Horizon Therapeutics. Excluding sales from its new subsidiary, Amgen's revenue grew by a decent, but not impressive, 5% year over year. However, things should improve in the coming years. Tezspire, an asthma treatment that was approved in the U.S. in December 2021, is coming into its own.
In the second quarter, Tezspire's revenue came in at $234 million, 76% higher than the year-ago period. Amgen's efforts with Tepezza could also pay off, and several other products in its lineup are performing well. That's before counting on the company's new approvals and label expansions. Expect decent top-line growth for Amgen through 2029. Lastly, the company is a good dividend pick. Its forward yield is 2.68%, compared to the S&P 500's average of 1.32%. Amgen has increased its payouts by 269% in the past decade.
Though perhaps not for investors looking for hyper-growth stocks, Amgen is a solid, reliable, blue chip dividend company to buy and hold.
