On Wednesday, Citi initiated coverage on Amgen (NASDAQ:AMGN) with a Neutral rating and a price target of $335. The firm highlighted the biotechnology company's recent increase in growth following the Horizon deal, emphasizing the potential impact of MariTide, Amgen's treatment for obesity and diabetes, which is considered the company's most significant value driver.
Amgen's approach to cash flow management, which has been favorable to shareholders, is expected to continue. However, Citi notes that the company's growth prospects are largely dependent on the clinical success of MariTide. Other products in Amgen's pipeline, such as Tepezza for thyroid eye disease, Uplizna for autoimmune conditions, Krystexxa for gout, and Imdelltra for small cell lung cancer, also contribute to the growth forecast, with estimated sales in 2030 ranging from $1.1 billion to $2.9 billion for these therapies.
Despite concerns over the loss of exclusivity for Xgeva and Prolia expected in 2025, Citi observes that investors have been less worried due to a stable projected 5-year compound annual growth rate (CAGR) for revenue and non-GAAP EPS at 3% and 6%, respectively, from 2024 to 2029. This is in comparison to peers, who are estimated to have a CAGR of 3% for revenue and 10% for EPS.
Citi's report underscores the intense competition in the GLP-1 market, which adds significant clinical risk to Amgen's outlook. This risk, along with the high expectations for MariTide, is the primary reason for the Neutral rating assigned by the analyst. The company's growth narrative and future performance are now closely tied to the progress and success of its key drug candidates, especially MariTide.
In other recent news, Amgen reported a 23% increase in its third-quarter revenues, reaching $8.5 billion, and projects total revenues for 2024 to range between $33.0 billion and $33.8 billion. This comes amidst reassurances from Amgen regarding the bone safety of its experimental obesity drug, MariTide, following concerns raised by Phase 1 study results. TD Cowen, Jefferies, and Cantor Fitzgerald have maintained their Buy or Overweight ratings for the company, with price targets ranging from $383 to $405.
BMO Capital Markets also maintained an Outperform rating on Amgen with a price target of $362.00, emphasizing the importance of broader data for evaluating drug safety. However, Barclays (LON:BARC) reiterated an Equalweight rating, maintaining a price target of $315.00, expressing concerns about MariTide's effects on bone mineral density and heart rate increases.
InvestingPro Insights
Amgen's financial metrics and market position offer additional context to Citi's analysis. According to InvestingPro data, Amgen boasts a substantial market capitalization of $162.16 billion, reflecting its significant presence in the biotechnology sector. The company's revenue growth of 21.25% over the last twelve months aligns with Citi's observation of increased growth following the Horizon deal.
InvestingPro Tips highlight Amgen's strong dividend history, having raised its dividend for 14 consecutive years. This supports Citi's note on the company's shareholder-friendly cash flow management. However, the stock's high P/E ratio of 38.45 and high Price / Book multiple of 21.53 suggest that investors are pricing in substantial growth expectations, particularly regarding MariTide's potential success.
While Citi expresses concerns about competition in the GLP-1 market, InvestingPro Tips indicate that Amgen is a prominent player in the Biotechnology industry and is expected to remain profitable this year. This reinforces the company's established market position despite the challenges ahead.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Amgen, providing deeper insights into the company's financial health and market performance.
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