On Wednesday, Leerink Partners adjusted its price target for Amgen (NASDAQ:AMGN) stock, lowering it from $352 to $305, while maintaining a Market Perform rating. The revision reflects a change in the firm's long-term earnings growth projection for Amgen, from an 8% to a 4% compound annual growth rate (CAGR) from 2025 to 2030, due to anticipated higher investment spending.
The analyst noted that despite positive Phase 2 results for Amgen's product MariTide, it only showed differentiation from Eli Lilly (NYSE:LLY)'s tirzepatide in terms of less frequent dosing. Full details on MariTide's efficacy, safety, and tolerability are still pending. Amgen has confirmed its intention to start Phase 3 trials and aims to offer MariTide as a user-friendly autoinjector device for monthly or less frequent administration.
Leerink Partners has also revised its 2031 worldwide sales forecast for MariTide, lowering the unadjusted estimate from $15 billion to $12 billion, while maintaining a 75% probability of success. Consequently, the risk-adjusted sales estimate for 2031 has decreased from $11 billion to $9 billion. The firm anticipates that Amgen's earnings per share (EPS) will face downward pressure in the medium term due to the projected increase in investment spending, with EPS estimates for 2026, 2027, and 2028 falling below consensus by 6%, 10%, and 16%, respectively.
However, Leerink sees potential for Amgen in Novartis (SIX:NOVN)'s Lp(a) candidate pelacarsen, which, if successful in its Phase 3 trial, could raise expectations for Amgen's own Lp(a) candidate, olpasiran. The firm projects 2031 worldwide sales of $9 billion for olpasiran, with an 80% probability of success and risk-adjusted sales of $7 billion. Leerink anticipates a significant acceleration in Amgen's revenue and earnings growth towards the end of the decade, assuming successful 2028 launches for both olpasiran and MariTide.
In other recent news, Amgen's Q3 revenue has seen a significant increase of 23%, reaching $8.5 billion. The company has also recently appointed Howard Chang, M.D., Ph.D., as its new Senior Vice President of Research and Chief Scientific Officer. In parallel, the biotechnology company has been closely monitored by several analyst firms following the release of the MariTide Phase 2 study results.
The study, involving obesity or overweight patients, indicated a weight loss of approximately 20% among non-diabetic participants. Oppenheimer maintained its Outperform rating on Amgen, expressing optimism regarding MariTide's performance in weight loss and glycemic control among patients with Type 2 diabetes.
Other firms like Piper Sandler and Morgan Stanley (NYSE:MS) have also reaffirmed their ratings on Amgen, focusing on the potential impact of MariTide. Meanwhile, Viking Therapeutics (NASDAQ:VKTX) is advancing with their subcutaneous drug VK2735, with BTIG analysts maintaining a $125 price target.
InvestingPro Insights
Adding to Leerink Partners' analysis, InvestingPro data provides further context on Amgen's financial position. The company's market capitalization stands at $150.51 billion, reflecting its significant presence in the biotechnology sector. Amgen's revenue growth of 21.25% over the last twelve months and a quarterly growth of 23.18% in Q3 2024 indicate strong top-line performance, aligning with the firm's positive outlook on potential future product launches.
However, investors should note that Amgen is trading at a high P/E ratio of 35.15, which could be a concern given Leerink's downward revision of long-term earnings growth projections. This valuation metric suggests the market may be pricing in optimistic growth expectations that could be challenging to meet given the anticipated increase in investment spending.
On a positive note, InvestingPro Tips highlight that Amgen has raised its dividend for 14 consecutive years, demonstrating a commitment to shareholder returns. This could provide some stability for investors during periods of increased R&D expenditure. Additionally, with a dividend yield of 3.21%, Amgen offers an attractive income component for investors.
For those seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Amgen, providing a deeper understanding of the company's financial health and market position.
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