On Apr 11, Zacks Investment Research upgradedAmgen Inc. AMGN to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Biotech company Amgen exited 2014 on a strong note with delivering positive earnings surprises in the last 4 quarters with an average beat of 9.72%. The company expects to earn $9.05 – $9.40 per share on total revenues of $20.8 billion – $21.3 billion in 2015.
Continued strong performance of key products, cost-cutting efforts and share buybacks should help the company achieve its guidance for 2015. The company has undertaken initiatives like staff reduction, rationalization of manufacturing facilities, and outsourcing of non-core business functions to help control costs.
The company expects to generate annual cost savings of up to $1.5 billion by 2018. Amgen is also trying to reduce its research and development (R&D) expenditure by entering into collaborations to develop its pipeline. Such deals help to reduce both the cost and risks associated with pipeline development.
Additionally, Amgen has a policy of returning cash to its shareholders through dividends. The company’s target is to return more than 60% of adjusted net income in the form of dividends and share buybacks through 2018. In Mar 2015, the company declared a dividend of 79 cents for the second quarter of 2015. Amgen also has impressive cash flow growth.
Amgen’s pipeline also looks promising with several updates lined up this year. The company is trying to expand the label of its multiple myeloma drug – Kyprolis, which has been granted priority review status in the U.S. with the FDA expected to deliver a response by Jul 26. Meanwhile, a response on Repatha (dyslipidemia) should be out in the U.S. due by Aug 27. Other candidates in the company’s pipeline currently under regulatory review include talimogene laherparepvec (metastatic melanoma).
Amgen is also looking towards deals to boost its pipeline. Earlier this year, the company entered into an agreement with Kite Pharma Inc. KITE to develop and commercialize the next generation of novel chimeric antigen receptor (CAR)-T cell therapies.