- Amgen on Tuesday promised investors a large share buyback and predicted higher-than-expected sales and earnings growth through 2030, spurring a jump in its stock price while leaving questions among analysts about how the company will deliver.
- The California biotech said it expects mid-single digit growth in revenue through 2030 along with increases in earnings per share at least in the high single digits and possibly in the low double digits. The company also plans to buy back up to $6 billion in stock by the end of March.
- Amgen surprised analysts with the optimistic guidance even as its top-selling drug, the arthritis treatment Enbrel, faces declining revenue from competition and the loss of patent exclusivity in 2029. Last year, Enbrel sales dropped 11% to $4.5 billion and the company said it expects the drug's net selling price to continue to fall.
Amgen CEO Robert Bradway is counting on increasing sales outside of the U.S., a growing portfolio of biosimilar products and a "robust" pipeline to deliver higher revenue and profits in the next eight years. "We have all the pieces in place that we need to succeed," Bradway said in a statement. "Our job now is to execute."
The company's forecast and plan for a share buyback prompted a 7.8% jump in its share price on Tuesday, but even analysts who are bullish on the stock expressed doubt about Amgen's expectations. The guidance "may require some leaps of faith," Piper Sandler analyst Christopher Raymond wrote in a Feb. 8 note to investors. (Amgen stock traded down 1% Wednesday morning.)
Amgen's forecast for mid-single digit growth in revenue suggests a total of about $35 billion in 2030, $11 billion more than Wall Street had expected, according to Umer Raffat, an analyst at Evercore ISI who has an "outperform" rating on the stock. While he couldn't account for all of the upside, he said Amgen can probably deliver higher-than-expected sales from its bone drug franchise and pipeline.
The company appears to be looking to two drugs, Lumakras and Tezspire, for much of its revenue increase in coming years. But Lumakras, the first drug that can target a common cancer mutation, brought in just $45 million in sales in the fourth quarter of 2021, compared with a consensus estimate of $61 million, raising "questions about the commercial potential of the franchise," Baird analyst Brian Skorney wrote in a Feb. 8 client note.
Amgen also pushed back its timeline for results from a Phase 3 confirmatory study comparing Lumakras to the chemotherapy docetaxel in patients with a specific form of non-small cell lung cancer. It's now expecting data in the second half of the year; in November, Amgen said it would have top-line results in the first half of 2022.
Baird's Skorney, who has an "underperform" rating on Amgen, said he remains skeptical of the company's long-term business outlook. Investors currently are valuing the company as a growth stock rather than as a mature large-cap drugmaker, he said.
Though other analysts also had questions about the expected growth, they said they were more inclined to trust Amgen's track record. "If any management team deserves the benefit of the doubt, it is this one," Raymond wrote.