A Pipeline Worth Buying – Amgen, Inc. (AMGN)

The biotechnology industry is one of the most attractive industries for investors primarily due to its high returns. However, high returns also mean a higher risk due to frequent price fluctuations. In such a scenario Amgen, Inc. (NASDAQ:AMGN) is the perfect stock because it is not only the biggest bio-pharmaceutical company in the world, but it also has strong drug sales that limit its downside. The company, however, is not without troubles. There is an increasing threat from both Pfizer Inc. (NYSE:PFE) and Teva Pharmaceuticals Industries Ltd (ADR) (NYSE:TEVA), which are trying to market competitors to Amgen’s major drugs.

Amgen

Amgen is a US-based biotechnology company involved in the discovery, development, and commercialization of drugs based on cellular and molecular biology for grievous illnesses. Neulasta is one of its primary drugs, which is a white blood cell that helps the body fight infectious diseases. It also owns Aranesp and EPOGEN, drugs which stimulate the production of red blood cells. These are only some drugs from Amgen’s rich product portfolio that contains star drugs like Enbrel.

Pipeline

Amgen is the largest biotechnology company in the world both in term of market capitalization and revenues. Therefore, understandably, it also has one of the richest pipelines in the world. The company has a total of 43 candidates in trials for various ailments including cancer, heart failure, osteoporosis, etc. According to company disclosures it has a staggering 18 candidates in Phase I trials. These compounds are still being investigated for the safety and proper dose ranges in trials involving a small number of human subjects. The company also has 13 candidates in Phase II and 12 in Phase III clinical trials. These candidates are currently being evaluated for efficacy and safety during large population human trials. Although approximately only 10% of compounds finally make it to the market, the candidates in Phase III have a much higher chance of reaching shelves.

Headwinds

A major concern for investors should be the conclusion of Amgen and Pfizer’s partnership on Enbrel. Pfizer and Amgen were the co-marketers of Enbrel in the United Sates, a drug which contributes approximately 25% to Amgen’s total sales. This partnership will end in 2013, after which Amgen will handle the marketing of Enbrel. The company has already started execution of a marketing plan which will focus on easier access and more advertisement for the drug. While sales can suffer due to the end of the Pfizer partnership, there will be a $1.6 billion saving in terms of royalty payments to Pfizer.