We recently compiled a list of the 10 Cheap Pharmaceutical Stocks to Buy According to Analysts. In this article, we are going to take a look at where Amgen Inc. (NASDAQ:AMGN) stands against the other pharmaceutical stocks.
The Evolving Landscape of Healthcare and Biopharma Innovation
Almost no other industry goes as far as the phrase “defensive” as the healthcare sector, which encompasses a wide range of companies that provide patient care, research and development of new medicines, and design, manufacture, and sell diagnostic instruments and tests. Patient care has evolved due to advancements in therapeutic techniques, drugs, and medical technology. Pharmaceutical companies in particular have received much attention as the demand for speedy results has increased. Grand View Research predicted that the value of pharmaceutical manufacturing worldwide was $516.48 billion in 2022. The sector is anticipated to increase at a compound annual growth rate (CAGR) of 7.63% between 2023 and 2030.
The biopharma industry now has the most extensive and varied clinical pipeline to date, due to decades of groundbreaking research. In 2012, there were 3,200 distinct medications under development; by 2022, that number had nearly doubled to 6,100. The average cost of producing a single treatment is over $1 billion, while just 14% of medications in clinical trials reach FDA clearance, according to MIT research. This could be a game-changer for AI. For instance, generative AI helps identify illness patterns in large data sets to determine the optimal medicine combinations while enabling researchers to investigate far more possible compounds than they could with conventional techniques. Additionally, according to PwC, AI-driven analytics and automation could cut operational costs by more than 30% and process timeframes by 60–70%.
In a similar vein, the market has grown significantly due to consumer interest in weight-loss medications like Ozempic and Wegovy. According to a recent study in the scientific journal Addiction, GLP-1 medications may reduce the prevalence of alcohol and opioid addiction by as much as 50%. Additionally, these medications are being evaluated for Alzheimer’s disease and other disorders that are frequently associated with obesity. The development of GLP-1s is becoming crucial for pharmaceutical businesses that want to be leaders in fields like cardiovascular and renal health. Competition with the leading companies in the anti-obesity business, which is expected to grow to $130 billion by 2030, is no longer the main emphasis.
The possibility for additional participants to enter the field is growing along with the possible applications of GLP-1s. For example, the Swiss business Roche entered the weight-loss drug sweepstakes in 2023 when it paid up to $3.1 billion to acquire California-based Carmot Therapeutics. The corporation wants to “fast-track” its anti-obesity medicines to regain faith in its pipeline and take a share of the weight-loss market.
Challenges and Opportunities in the Pharmaceutical and Biotech IPO Market
The pharmaceutical sector may appear to be flourishing at first glance. However, it has its own set of difficulties, just like every other industry. Compared to 2021, funding for biotech and pharmaceuticals fell by a sharp 48.6% last year. In 2022, the IPO market also saw a significant decline, with profits falling as a result of market volatility and instability. Many general investors were apprehensive of the spike in drug-developer initial public offerings (IPOs) in 2020 and 2021, which garnered about $46.5 billion, more than the total from the preceding eight years combined.
Future initial public offerings (IPOs) are being closely watched due to the high-risk, high-reward nature of the biotech sector as well as macroeconomic and geopolitical issues that impact larger markets. However, as of September 3, 2024, drug developers had raised $2 billion through initial public offerings (IPOs) this year, a 24% increase over the same period in 2023. However, according to BNN Bloomberg, over two-thirds of these funds were raised in the first two months as a result of a spike in new listings. However, pharma companies’ portion of U.S. IPO profits has decreased from 17% in February to 6.5%, with less than $800 million raised in the next six months.
Tim Hunt, CEO of the Alliance for Regenerative Medicine (ARM), emphasized increased funding in cell and gene therapies in 2024 in his opening remarks at the October 7 conference. According to him, thirteen of the fifteen biggest pharmaceutical companies in the world by market capitalization now have an “active presence” in this area. Major pharmaceutical corporations are increasingly turning to cell and gene therapies to fill possible revenue shortages as many product patents are about to expire. Despite this optimism, there has been a reduction in related patent filings, and the number of cell and gene therapy deals in the pharmaceutical industry fell by 38% in Q2 2024 compared to the same time in 2023. Nevertheless, the sector is appealing and should not be disregarded by possible investors. Given this, we will take a look at some of the best cheap pharmaceutical stocks according to analysts.
Our Methodology
Our methodology involved selecting stocks with a market capitalization exceeding $3 billion, a P/E ratio below 40, and a price target upside of more than 10%. We then ranked these stocks based on their upside potential, as of February 17.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 363.5% since May 2014, beating its benchmark by 208 percentage points (see more details here).
A pharmacist filling a prescription for a complex drug developed by the company.
Amgen Inc. (NASDAQ:AMGN)
Price Target Upside: 10.68%
Amgen Inc. (NASDAQ:AMGN) is a pharmaceutical company that discovers, develops, manufactures, and markets human therapeutics. It provides patients with complicated tumors with innovative treatments, particularly in regions where there are a lot of unmet needs. The corporation had 14 medications at the end of fiscal Q4 2024, each of which had an annualization of over $1 billion. Over the course of the decade, a number of them are anticipated to be important growth drivers for the business.
The medications EVENITY, which targets osteoporosis in postmenopausal women, and Repatha, which addresses heart disease and cholesterol, are consistently generating significant growth for Amgen Inc. (NASDAQ:AMGN). Repatha has grown into a commodity worth billions of dollars. Its expansion is also being driven by heart disease, which is the world’s top cause of mortality.
Additionally, Amgen Inc. (NASDAQ:AMGN) has a robust rare illness portfolio that is anticipated to grow in 2025 with the possible international regulatory approval of TEPEZZA, the first and only FDA-approved medication for the treatment of Thyroid Eye illness (TED). It is anticipated that the company’s rare disease business will continue to grow as additional indications for UPLIZNA, which treats neuromyelitis optica spectrum disorder (NMOSD), are introduced.
Given that the company’s October 2023 acquisition of Horizon Therapeutics is anticipated to pay off over the following five years, analysts are optimistic about the stock. In its investor letter for Q2 2024, PGIM Jennison Health Sciences Fund said the following about Amgen Inc. (NASDAQ:AMGN):
“Amgen Inc. (NASDAQ:AMGN) is a large-cap global biotech company with a diverse portfolio of marketed and pipeline products. Amgen’s discovery pipeline has led the company to broaden its focus from oncology, immunology, and renal disease to include musculoskeletal, cardiovascular, and neurologic conditions. In addition, Amgen has turned its expertise in antibody manufacturing into a leading position in the development of biosimilars of competitor drugs. Most recently, Amgen shares advanced in 2Q following its announcement that its novel injectable GLP-1 agonist / GIPR antagonist, MariTide, for obesity, showed promising interim Phase 2 data and has shown enough promise to warrant advancement into pivotal trials as soon as late 2024. While Eli Lilly and Novo Nordisk will remain the market leaders in the diabetes/obesity space, we think there is room for Amgen to carve out a meaningful share of the market with its antibody-peptide conjugate approach that could enable monthly or better dosing for MariTide.”
Overall AMGN ranks 9th on our list of the cheap pharmaceutical stocks to buy according to analysts. While we acknowledge the potential of AMGN as an investment, our conviction lies in the belief that 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 is originally published at Insider Monkey.