Amgen Earnings: Obesity Drug Update Is Highly Encouraging

Key Morningstar Metrics for Amgen

• Fair Value Estimate: $317.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Amgen’s Earnings

Amgen’s AMGN first-quarter product sales grew 22%, or 6% excluding the October 2023 acquisition of rare-disease firm Horizon Therapeutics, slightly ahead of our expectations. Management narrowed its top- and bottom-line guidance for the full year.

In conjunction with earnings, the company announced it completed an interim analysis of a phase 2 trial of obesity drug candidate maritide (AMG 133). Although the firm did not disclose many details, management was encouraged enough to announce that the program will move to phase 3 in obesity, obesity-related indications, and diabetes—an area where theoretical concerns about the drug’s effects on blood sugar previously made development less appealing.

We think the most likely scenario is that interim data showed manageable tolerability, solid safety, efficacy that rivals the top drug candidates in development (around 25% weight loss), and a differentiated dosing profile (monthly or perhaps quarterly dosing). We previously included a 30% probability of approval and $4 billion in probability-weighted sales by 2033 in our Amgen valuation. Given this confirmation of positive phase 2 results, we’re raising our probability of approval to 60%, which raises our sales estimate to $8 billion by 2033.

We’ve also included higher capital expenditures beginning in 2025 to support a 2027 launch. We see Amgen’s strong experience with antibody manufacturing as lending credibility to its ability to supply the market. In addition, if dosing is quarterly instead of the once-weekly dosing for current obesity treatments, manufacturing could be less demanding.

After accounting for the strong quarter and potential maritide sales and costs, we’re raising our fair value estimate of Amgen to $317 per share from $268. Regardless of maritide’s potential sales, we think the firm’s broad portfolio and solid pipeline in immunology, rare disease, oncology, and the cardiometabolic space give it a wide moat.