Amgen Earnings: Competitors Pressure Price Across Growing Number of Products; Shares Fairly Valued

We’re maintaining our $255 fair value estimate for Amgen following first-quarter results that were in line with our estimates. We’ve made some small changes to our valuation model, including pushing back the close of the Horizon Therapeutics acquisition by one quarter to mid-2023, removing two lupus drug candidates from our forecast, and slightly reducing our forecasts for immunology drugs Enbrel and Otezla. However, after factoring in better prospects for long-term growth of Horizon’s thyroid eye disease drug Tepezza and Amgen’s osteoporosis drug Evenity, this had no significant impact on our valuation. Amgen’s product sales grew by 2% in the first quarter, with 14% volume growth weighed down by lower prices (5% impact), lower wholesaler inventories, and foreign exchange headwinds. Total revenue was further hit by lower COVID-19 antibody sales, leading to a 2% revenue decline, with rising R&D costs driving down operating margin and leading to a 6% non-GAAP EPS decline. Overall, we think shares look fairly valued, with headwinds on older drugs countered by a portfolio of newer products and a pipeline that both help support a wide moat.