A Quick Look at Amgen, Inc.'s Drug Development Pipeline

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The stock market is always forward-looking, but no sector takes "looking into the horizon" to an extreme more than the healthcare industry.

You see, most companies produce a product or offer services that have an immediate and tangible reflection on the success of a business. If a company makes microprocessor chips, you can examine whether or not those chips are selling and making a company profitable, all likely within the first year or two following a company's founding.

Biopharmaceutical companies, on the other hand, are valued almost entirely on their drug development pipeline. It can take years, or sometimes even decades, for a biopharmaceutical company to get its first drug approved on pharmacy shelves, leaving the traditional methods of sales and profits to analyze the true value of many healthcare companies somewhat obsolete.

For a select few biopharmaceutical companies, such as Amgen (AMGN 0.60%), we as investors have both current sales figures as well as its drug development pipeline to review. Today, we'll take a closer look at Amgen's drug development pipeline and see what select experimental drugs are the pillars to the company's future success -- or failure.

Amgen's drug development pipeline
As of mid-February, when Amgen most recently updated the status of its pipeline on its website, the company was in the process of running 46 separate human clinical trials. As Amgen notes, 16 of its studies were in phase 3, or late-stage trials, 10 were in mid-stage studies, and another 20 were in phase 1, or early-stage trials. Amgen's pipeline products are a mix of innovative drugs as well as supplemental new drug indications for already-approved therapies.

Source: Amgen.

"Why it is so important that Amgen have such a robust drug development pipeline?" you ask. The reason is that branded drugs only have a finite patent exclusivity period, meaning biopharmaceutical companies like Amgen need to always remain vigilant in their quest to develop new drugs. Amgen, for instance, will see its best-selling drug, Neulasta, which helps maintain a patient's white blood cell counts while undergoing chemotherapy, lose exclusivity in late 2015 in the U.S. This loss will sting Amgen if it doesn't have a few products in its drug development pipeline to take Neulasta's place. 

Three developing drugs you should be watching
While Amgen has noted that it plans to deliver late-stage data on 10 experimental drugs between 2014 and 2016, I see three developing drugs as the cornerstone to its future success.

The first is the proposed label expansion of cancer-fighting drug Kyprolis, which Amgen acquired when it purchased Onyx Pharmaceuticals last year for $10.4 billion.

Kyprolis is currently approved as a third-line treatment for multiple myeloma, a cancer that develops in patients' bone marrow. Admittedly, Kyprolis has had decent success in this third-line indication, but Amgen purchased Onyx in part to advance Kyprolis into a second-line indication, which is where a considerably larger opportunity exists for the drug.

Source: Amgen.

In the ASPIRE study, which measured progression-free survival of Kyprolis compared to a control drug, the Kyprolis-treated patients exhibited a statistically significant PFS improvement of 8.7 months. Unfortunately, the FOCUS study, which was targeted at overall survival improvements, wasn't statistically significant, leaving in question whether or not Kyprolis has a future as a second-line therapy. If Kyprolis can garner an approval in the U.S. based on its PFS improvement and similar overall survival to existing therapies, as well as in Europe, it would still be on pace to top $2 billion in peak annual sales. If not, Amgen may discover that it overpaid for its purchase of Onyx.

Secondly, and sporting an even rosier outlook than Kyprolis, is cancer vaccine talimogene laherparepvec, which is (thankfully) better known as T-Vec, a treatment for melanoma.

T-Vec has delivered monstrously good data thus far in late-stage studies. In March, Amgen announced that in a phase 3 study T-Vec shrank 64% of all injected tumors by 50% or more, of which half of those tumors had a complete response and were no longer visible upon imaging tests. Also, around a third of non-injected tumors demonstrated a similar effect of shrinking 50% or greater. In other words, it appears to suggest T-Vec, an immune response-stimulating vaccine, is doing exactly what it was designed to do.

Additionally, T-Vec led to a 4.4-month median overall survival improvement over the control drug, as well as a durable response of 12 months or longer in 65% of responding patients. What investors will want to monitor here is whether the Food and Drug Administration favors the benefits over T-Vec's adverse events. If it does, T-Vec could be a blockbuster in the making for Amgen. 

Source: Amgen.

Finally, I'd look to psoriasis drug candidate brodalumab as a source of inspiration for Amgen and AstraZeneca (AZN 1.03%) shareholders. Psoriasis is a chronic condition affecting 7.5 million people in the U.S. and around 125 million worldwide, so it could be an in-demand therapy if approved.

In its phase 3 AMAGINE-1 study, 83.3% of high-dose group patients noted significant skin clearing, with 60.3% of the lower-dose patients exhibiting at least 75% improvement from baseline. By comparison, just 2.7% of placebo patients met this criteria of 75% improvement from baseline. A 100% improvement (i.e., total clearing of the disease) was noted in 41.9% of high-dose patients, 23.3% of lower-dose patients, and just 0.5% of placebo patients. 

Though AstraZeneca is a development partner, Amgen holds the commercial rights in the lucrative U.S. market, so an approval by the FDA for brodalumab would flow right into Amgen's coffers. Peak sales estimates for the drug are wide-ranging, but median estimates are around $1 billion. 

Make or break time
Although Amgen's stock has been on fire for the past two years, it has been a huge disappointment over the previous 12 years. Investors have been patiently waiting for Amgen's drug development pipeline to deliver organic products, and it appears that wait may finally be over.

There are plenty of potential home run candidates in Amgen's pipeline, three of which I've highlighted above, but I have to wonder if Wall Street hasn't already priced in the potential approval of these therapies considering Amgen's astronomical run higher. It's for that reason I continue to remain a bystander rather than a buyer of Amgen's stock.

Editor's Note: The article was adjusted to clarify that the FOCUS study targets overall survival.