AMGN

Sanofi's M&A Rumors, Amgen's Better Than Expected Portfolio Outlook

06/18/2009 by Research Reloaded

The WSJ deal blog has discussed circulating rumors in regards to Sanofi Aventis (SA) making potential acquisitions, and including Bristol Meyes (BMY), Allergan (AGN), and Amgen (AMGN) in the mix of contenders. In regards to Allergan and Amgen in particular, now might be one of the cheaper times to pick them up, as per BNET Pharma, given their current near-term difficulties. Allergan is facing reduced demand for its vanity-based products such as Botox while Amgen is awaiting a hopeful approval for cancer Denosumab (October 19th, 2009) as a lone near-term savior for its maturing drug portfolio. For Sanofi it is a bit tricky, if indeed AMGN is on the radar, since if they wait for the Denosumab results, they could see AMGN shares become much more expensive. But of course if they buy ahead, then the results could be negative. This is the dilemma facing all AMGN investors right now.

But even if Denosumab doesn't pan out, I actually believe fears regarding AMGN's maturing portfolio are overdone. For biologics (biotech drugs), the generics threat will be no where near what it is for standard pharmaceuticals. It's just too hard to replicate biologics, thus requires sizeable up-front investment and manufacturing know-how, as was the result of the FTC's excellent report on the biotech industry. Highlights of this report below. (FOB's are the generic producers, pioneers are the originals like AMGN)

AMGN - 1Q09 Performance Analysis

04/27/2009 by Research Reloaded

A concise overview of Amgen's (AMGN) current situation, post 1Q09 results.

Summary

Amgen shares trade at a historically cheap trailing PE due to market concerns that key blockbuster drugs are seeing revenue declines and that Amgen’s pipeline is not sufficient to provide significant long term earnings growth.

In the most recent quarter, Amgen reported adjusted EPS of $1.08, down 4% YoY. Adjusted net income was down 8% and total revenue down 8% YoY as well. Nevertheless, an analysis of Amgen’s earnings call reveals that the company’s 8% revenue decline was not as bad as it might look on a first pass. One off factors such as a change in sales model for Amgen’s key product Enbrel, which benefitted last year’s revenue number by $120m, the divestiture of three drugs which had generated $200m, and a $69m forex effects caused the entire apparent decline. Adjusting out these factors would result in an adjusted revenue growth, rather than decline, of 3% YoY. Op expenses were down 10% due to tight cost control.

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