Amgen (NASDAQ: AMGN) is placing a bet that its group of cardiovascular and immunology drugs will help the biotech outshine its competition.
The pharmaceutical behemoth, which has a market cap of $187 billion, is investing in cardiology and immunology, two specialties that have produced innovative drugs to boost its revenue.
Focus on cardiology, immunology specialties
Amgen is growing its pipeline in cardiology and immunology to compete with its rivals while increasing its profit margin. The biotech’s newer drugs, such as Repatha, which lowers cholesterol, have proven to be a blockbuster and help Amgen “keep free cash flow above 30% of sales,” wrote Karen Andersen, a director for Morningstar. Repatha has been estimated to generate $4.5 billion over a longer period.
Blincyto, a cancer drug, and Tezspire, an asthma drug, are also adding to Amgen’s bottom line. Launched in the U.S. in 2022, Tezspire could generate $3 billion in sales for the company.
Both Repatha and Tezpsire are “poised to be top products by 2030, in addition to oncology drug Lumakras (approved in 2021),” she said. “Despite Repatha’s slow start, we expect PCSK9 antibodies as a class could generate $7 billion in peak sales with significant potential for volume growth to more than counter additional pressure on price as well as new competitive threats (like Novartis’ new drug Leqvio and Merck’s oral enlicitide).
Previous drug acquisitions have also contributed to Amgen’s profit margin, including Decode, which is a human genetics database, giving the company the ability to identify potential new drug targets and develop them.
Direct-to-patient program launched
Amgen’s revenue increased by 9% to $9.87 billion during the fourth quarter, beating estimates by Wall Street analysts who predicted $9.47 billion in revenue.
The biotech reported a profit of $1.33 billion, compared with a profit of $627 million. Amgen said the 111% increase in earnings was the result of higher revenue and lower net unrealized losses on equity investments.
Revenue in Amgen’s product sales rose by 7%, led by a 10% increase in product volume. The selling price of its products fell by 4%.
The biotech is estimating revenue of $37 billion to $38.4 billion for 2026, while Wall Street forecasts revenue of $37.19 billion, according to FactSet. The stock has risen by 23% during the past six months.
Last October, Amgen began AmgenNow, its direct-to-patient program to decrease the cost of drugs, which was recommended by the White House’s call to reduce prescription drug prices for U.S. patients.
But Amgen does face challenges from biosimilar and branded competition even though its group of newer drugs is “keeping overall sales steady,” Andersen said.
“Tougher labels and reimbursement had been affecting anemia drugs Epogen and Aranesp since safety concerns emerged in 2007, and the 2019 launch of Pfizer’s biosimilar, Retacrit, is weighing on sales,” she wrote. “Neutropenia drugs Neupogen and Neulasta are also in decline due to biosimilar launches.”
The biotech is combating these challenges by improving the efficiency levels that occur during the production of its drugs, which in turn frees up cash to spend on research and development and promote its drugs to combat cardiovascular diseases.
“Amgen’s improved manufacturing efficiency not only will benefit gross margins but also could give the firm a cost advantage in the biosimilar market,” Andersen said.
In 2019, the company bought Otzela, an oral immunology drug which “fits well” with Amgen’s Enbrel, a drug that treats chronic autoimmune inflammatory conditions, she added.
Amgen is increasing its biosimilar portfolio in an effort to compete against Roche’s and AbbVie’s (NYSE: ABBV) mature oncology and immunology franchises.
“We think Amgen’s experience navigating regulatory, clinical, and manufacturing hurdles, as well as its strong reputation for its branded therapies, is helping the firm position itself as a leading biosimilar player,” Andersen said.
As a biotech, Amgen and its competitors spend millions of dollars to create biosimilars, which are a type of biologic medication that are effective for treating diseases and illnesses, according to the U.S. Food and Drug Administration. Biosimilars are cheaper than the original biologics and are similar to creating a generic version of a drug.
The company has invested over $2 billion across a portfolio of 11 biosimilar medicines that are approved or in development to treat oncology, inflammation, and rare diseases.
Amgen’s cardiology and immunology drugs will continue to generate higher margins as more patients receive diagnoses for diseases that require consistent, longer-term treatment.
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