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Hype Asset of the Day | December 13th, 2022



Amgen Inc. (NASDAQ: AMGN)

An international biopharmaceutical firm with its main office in Thousand Oaks, California, is called Amgen Inc. Amgen, one of the biggest independent biotechnology firms in the world, was founded in 1980 in Thousand Oaks, California. Focused on molecular biology and biochemistry, its goal is to provide a healthcare business based on recombinant DNA technology. Since becoming the only remaining bidder for Horizon Therapeutics, Amgen Inc. has seen an increase in mentions by 176% over the last day, prompting investors to wonder if this is the right time to take a position in the company. Currently, shares of Amgen Inc trade at $278.46.


Positive Hype

There are numerous reasons why Amgen has generated so much positive hype over the last day, here are some of them.


  • Amgen Inc's Lumakras (KRAS inhibitor) is already available to treat patients suffering from advanced lung cancer as a second-line therapy after initial therapy fails or stops working. Third-quarter sales of Lumakras, which were approved last year, totalled $75 million.


  • Amgen Inc. plans to acquire Horizon in a deal that values the smaller drugmaker at $27.8 billion. Amgen CEO Robert Bradway called the acquisition "a compelling opportunity for Amgen." He said that Horizon's approved drugs Tepezza, Krystexxa, and Uplizna would help Amgen. Bradway also stated that Horizon's pipeline was a good fit with Amgen's programs in development.


  • Revenue from this treatment is expected to eventually top more than $4B once Horizon can secure the right to sell Tepezza in Europe and Japan.


  • Amgen’s Otezla and Enbrel are facing competition from Sotyktu and HZNP's portfolio “could help fill that gap as a growth driver for AMGN.


  • An HZNP takeover “could potentially help Amgen manage its tax burden going forward."“In 2014 HZNP acquired Vidara Therapeutics International, which moved Horizon to Ireland and reduced its tax bill substantially. AMGN is facing potentially higher taxes due to ongoing issues with its Puerto Rico facility and a deal with HZNP could perhaps help to mitigate this issue, in our view,” the analysts added.


  • Amgen also recently announced that their Phase 2 clinical trial results revealed that the company's drug candidate, known as olpasiran, is very effective in treating patients with elevated lipoprotein(a) levels and a history of atherosclerotic cardiovascular disease (ASCVD). An analyst at investment bank Oppenheimer, anticipates that the drug's annual sales could reach $1.5 billion in 2030 for Amgen.


  • Analysts believe that Amgen's non-GAAP (adjusted) diluted earnings per share (EPS) will grow at 7% annually over the next five years.


  • Amgen's 2.7% dividend yield is considerably higher than the S&P 500 index's 1.7% yield. With the dividend payout ratio projected to clock in at 44% in 2022, the company should have no issue growing its dividend in the future.


Negative Hype

No investments are 100% flawless, and Amgen wouldn’t be an exception. Here is one reason why it might not be the best time to invest in the company.


  • Investors are understandably not very thrilled with the $116.50 per share Amgen plans to pay. It represents a premium of 47.9% above Horizon's closing price from they before they announced acquisition discussions.

Conclusion

Amgen's stock fell 2% after the acquisition announcement, but given the need among biopharmaceutical companies to keep growing, the Horizon acquisition is consistent with what's happening more broadly throughout the industry. However, Amgen still has solid prospects both in regard to this deal and its other drugs. Moreover, the company offers a comfortable dividend and has the financial standing to back itself up. Best of all, income investors can scoop up shares of Amgen at a forward price-to-earnings ratio of 16.2. This is just above the S&P 500 pharmaceutical industry average of 14.9, which is arguably a well-supported valuation.


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