Analyst Note| Karen Andersen, CFA |
Amgen's 12% revenue growth in the third quarter was in line with our expectations, with 19% non-GAAP EPS growth slightly ahead of our estimates, and we're maintaining our $215 fair value estimate as we approach key additional data readouts expected before the end of the year. Enbrel declines and biosimilar pressure on anemia drugs (Aranesp, Epogen) and neutropenia drug Neulasta were more than offset by recovery in demand for osteoporosis drug Prolia, U.S. launches of Amgen's biosimilar versions of Avastin (Mvasi) and Herceptin (Kanjinti), and a final full quarter of favorable comparisons due to the November 2019 acquisition of psoriasis drug Otezla. With stable Otezla pricing expected heading into 2021, we think Amgen is likely to also benefit from expanded use in the mild-to-moderate setting, although upcoming head-to-head data against Bristol's TYK2 drug could weigh on long-term growth. Following the disappointing data for heart failure drug omecamtiv mecarbil and vague update for oncology pipeline drug sotorasib, all eyes are on the upcoming data for asthma drug tezepelumab; we assign a 50% probability of success in two pivotal studies in the fourth quarter (Navigator study in severe uncontrolled asthma and Source study in oral corticosteroid dependent asthma), based on strong phase 2 data but a novel mechanism of action that adds risk. Amgen is also working with partner Lilly to boost manufacturing capacity of Lilly's monoclonal antibodies to treat COVID-19, and we expect the combination regimen could see strong uptake in 2021, although supply is still limited and we're awaiting further data before incorporating into our model. Regardless, Amgen's diverse portfolio and advancing pipeline of novel oncology therapies and biosimilars continue to support a wide moat.