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Amgen's Innovation Counters Biosimilar Pressure

We hold revived enthusiasm for the firm's research engine.

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 Amgen (AMGN) has its roots in providing supportive-care products to kidney disease and cancer patients, and free cash flow as a percentage of sales is poised to surpass 30% as the firm undertakes massive cost-cutting and improves manufacturing.

Amgen's biologics are vulnerable to biosimilars because of their age and ease of manufacturing, and innovative branded drugs are also stealing share. While anemia drugs Epogen and Aranesp have recently seen growth--tougher labels and reimbursement had been affecting the products since safety concerns emerged in 2007--we expect both products to decline going forward. Neutropenia blockbusters Neupogen and Neulasta have direct biosimilar competition in Europe. In the United States, Teva (TEVA) has launched Granix, its branded version of Neupogen, and Sandoz recently gained Food and Drug Administration approval for a biosimilar version of Neupogen (Zarxio). While legal battles are delaying Zarxio's launch, we expect this product, as well as Epogen and Neulasta biosimilars from Hospira (Pfizer (PFE)) and Sandoz, could compete by 2016. Finally, branded competitors are poised to continue to erode Enbrel's share, and biosimilar Humira could weigh on Enbrel sales by 2018.

Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.