We came across a bullish thesis on Amgen Inc. (AMGN) on Disruptive analytics’ Substack by Magnus Ofstad. In this article, we will summarize the bulls’ thesis on AMGN. Amgen Inc. (AMGN)’s share was trading at $272.11 as of Jan 17th. AMGN’s trailing and forward P/E were 34.75 and 13.07 respectively according to Yahoo Finance.
A scientist holding a vial of the cancer-fighting drug developed by the biotechnology company.
Pharma stocks faced significant challenges in 2024, largely due to political scrutiny and concerns over expensive drugs. However, the Inflation Reduction Act has shifted the landscape, forcing pharmaceutical companies to rely less on price hikes and more on developing innovative drugs that are less vulnerable to price negotiations. Many companies, including AMGN, have strategically diversified their pipelines, a move that has largely been overlooked by the market, creating an arbitrage opportunity for investors to capitalize on undervalued assets. AMGN, in particular, has seen over 20% revenue growth in 2024, but the stock price has declined by 10%, reflecting market skepticism despite strong business fundamentals.
AMGN’s business is solid, supported by a robust portfolio of market-leading drugs targeting heart disease, osteoporosis, asthma, and rare diseases. Additionally, the company’s new drug candidate in the obesity space, MariTide, shows promising potential. The most notable aspect of AMGN’s growth, however, lies in its innovative oncology portfolio, particularly its BITE platform, which is expected to yield several new drugs in the coming years. Imdeltra, targeting small cell lung cancer, and Fortitude, focused on gastric cancer, are expected to reach the market in 2025/2026, offering substantial growth opportunities for the company. Despite these advancements, AMGN’s stock remains undervalued, primarily due to the market’s intense focus on MariTide, its obesity drug candidate, which has caused significant volatility in the stock price.
The narrative surrounding MariTide has been inconsistent, with the stock price rising 12% in May 2024 on promising initial data, only to fall 7.4% in November following Phase 2 trial results that didn’t meet heightened expectations. This volatility has distracted investors from the strong performance of AMGN’s existing portfolio, which has continued to deliver solid results, with Q3 2024 showing 23% year-over-year revenue growth and several key products demonstrating double-digit sales increases. AMGN’s established drugs and its promising new pipeline provide a long-term foundation for growth, yet these factors have been overshadowed by short-term focus on the obesity drug.
In light of these dynamics, the current market sentiment presents a buying opportunity for AMGN. By focusing on the company’s long-term growth catalysts, including its oncology pipeline and strong product portfolio, rather than short-term fluctuations, investors can position themselves to benefit from the significant upside potential that AMGN offers. The market’s current undervaluation of AMGN makes it an attractive investment for those looking beyond immediate market noise and focusing on intrinsic value.
Amgen Inc. (AMGN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 68 hedge fund portfolios held AMGN at the end of the third quarter which was 69 in the previous quarter. While we acknowledge the risk and potential of AMGN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMGN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.