Third Point Partners ups stake in Amgen

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Nov. 20 2020, Updated 5:03 p.m. ET

Increased stake

Activist investor Dan Loeb’s fund, Third Point Partners LP, disclosed some of the positions traded during the latest quarter in its 3Q investor letter. The fund said that it has added to its position in Amgen, Inc. (AMGN). The fund held 450,000 shares in Amgen at the end of 2Q14 according to its latest 13F filing. The stock had accounted for 0.65% of Third Point’s $8.1 billion portfolio at the end of the second quarter. Third Point said in its 3Q letter that it’s one of Amgen’s top shareholders.

Overview of Amgen

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Amgen is a biotechnology company known for discovering, developing, manufacturing, and delivering innovative human therapeutics. It has a ~$109 billion market cap and saw revenues of around $20 billion in 2013. It markets mainly recombinant protein therapeutics for supportive cancer care, inflammation, nephrology, and bone disease.

Amgen peers

Third Point believes Amgen trades at a discount 

Third Point believes that Amgen trades at a substantial discount compared to its peers. The fund added that the company “also trades at a discount to the U.S. pharmaceutical sector, despite superior revenue and earnings growth rates. Amgen’s current discount to fair valuation – and the lack of structural hurdles to closing this gap – make it an attractive investment opportunity.”

A comparison of Amgen with its industry peers such as Biogen Indec Inc (BIIB), Gilead Sciences, Inc. (GILD), and Celgene Corporation (CELG) shows that its price-to-earnings ratio is below the peer average. The company’s enterprise value upon sales and enterprise value-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio is also below the peer average. Amgen and its above-mentioned peers are part of the VanEck Vectors Biotech ETF (BBH) and the Health Care Select Sector SPDR Fund (XLV).

Third Point says Amgen is a “hidden value situation”

The fund noted in its letter that “Amgen has all the hallmarks of a hidden value situation, which is one of the fund’s favorite investment themes.” It believes investors have yet to give credit to the generative potential of Amgen’s mature products or the expected financial impact of its growth assets. The fund said, “In the mature products segment, we believe revenues will be sustainable and concerns about potential erosion are overstated. With respect to Amgen’s pipeline, we believe the market underappreciates how disruptive some of its new products will be.”

The next part of this series will look at Amgen’s product pipeline.

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