Amgen, Inc. (AMGN): Is It Too Hot to Handle?

Believe it or not, a nearly 20% drop in profit margin since 2009 is not all that bad for a member of big pharma. Investors can still find investments trending in the opposite direction. Pfizer Inc. (NYSE:PFE)‘s net income and profit margin rose to four year highs in 2012, while AbbVie Inc (NYSE:ABBV) has witnessed profit margins decline by just over 10%.

Pfizer Inc. (NYSE:PFE), which faces similar concerns from the patent cliff, still managed to post a big first quarter. Cutting its quickly growing animal health business loose didn’t seem to impede progress elsewhere, as income grew 8% compared to last year. Meanwhile, AbbVie Inc (NYSE:ABBV) is working hard to diversify away from Humira, which generated half of the company’s revenue in 2012. Two exciting immunology drugs in phase 2 trials are certainly promising signs, although it is pretty early to draw call them shoo-ins.

Foolish bottom line
In the end, it all comes down to whether you believe the upward trajectory in net income is just a fluke or here to stay for the long term. On one hand, the share price is at an all-time high. On the other, valuation metrics do not appear to be inflated. I’m a big believer in the future of biomanufacturing and biosimilars — areas in which the company is going all-in — but I remain a little timid when looking up at the share price. If margins continue to their quarterly slide to open 2013, then I expect shares to lose some steam (even if it is meaningless to long-term investors). Until the company proves otherwise, Amgen, Inc. (NASDAQ:AMGN) stock is too hot to touch. Do you disagree? Let me know in the comments section below.

The article Is Amgen Stock Too Hot to Touch? originally appeared on Fool.com and is written by Maxx Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool has no position in any of the stocks mentioned.

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