On Wednesday, Leerink Partners adjusted its stance on Amgen Inc . (NASDAQ:AMGN), downgrading the biotechnology company's stock from Outperform to Market Perform. Concurrently, the firm raised its price target to $324 from $318.
The revision by Leerink Partners comes in light of evolving narratives around Amgen's investment prospects, particularly concerning its obesity drug pipeline. The detailed Phase 1 results for Amgen's obesity treatment, MariTide (AMG 133), released on Sunday, have introduced a degree of uncertainty regarding the upcoming Phase 2 data. Analysts at Leerink Partners suggest that in order for AMG 133 to stand as a competitive program, it must demonstrate not only significant weight loss but also a substantial influence on metabolic parameters and blood glucose control. These results are keenly anticipated in the fourth quarter of 2024.
Comparatively, competitors in the obesity treatment space, such as Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO), have set high standards with their incretin programs, tirzepatide and semaglutide, which have shown exceptional health benefits. Leerink Partners has expressed a cautious approach, opting to step to the sidelines ahead of the Phase 2 readouts due to the uncertainty surrounding AMG 133's potential to compete effectively in the market.
Moreover, Leerink Partners has also labeled AMG-786, Amgen's oral obesity Phase 1 candidate with an undisclosed mechanism, as high risk. Adjustments to the financial model were made, including a reduction in earnings per share (EPS) forecasts due to anticipated higher spending by Amgen. The firm has revised its 2024 EPS estimate from $21.23 to $19.54, which falls within Amgen's own guidance range of $18.90 to $20.30. Additionally, the 2025 EPS forecast has been adjusted from $22.06 to $21.61.
InvestingPro Insights
As investors digest the latest updates from Leerink Partners on Amgen Inc. (NASDAQ:AMGN), it's essential to consider the company's financial strength and market performance. According to InvestingPro, Amgen boasts a solid market capitalization of $162.17 billion USD, reflecting its significant presence in the biotechnology industry. While analysts ponder over the future of Amgen's obesity treatment pipeline, the company's stock stability is underscored by its low price volatility and a consistent history of dividend growth, with dividends raised for 14 consecutive years—an InvestingPro Tip that highlights Amgen's commitment to shareholder returns.
While the stock is trading at a high Price / Earnings (P/E) ratio of 24.29, it's important to note that Amgen's P/E ratio has adjusted to 22.28 over the last twelve months as of Q3 2023. This suggests that the company is being valued at a premium, possibly due to its strong market position and past performance, including a large price uptick of 26.96% over the last six months. Another InvestingPro Tip to consider is that Amgen is trading near its 52-week high, at 95.86% of this threshold, indicating recent investor confidence in the stock.
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