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How Does Amgen Compare to Peers in Valuation?

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Mar. 21 2016, Published 4:38 p.m. ET

Amgen’s valuation

On March 17, 2016, Amgen (AMGN) was trading at a forward PE (price-to-earnings) multiple of about 11.7x. Since January 1, 2016, the company has traded at a PE multiple in the range of 11.5x–13.5x.

Since January 2014, Amgen (AMGN) has traded at a premium to AbbVie (ABBV) but at a discount to peers Biogen (BIIB) and Celgene (CELG). Although the company has managed to launch six new products in 2015, Amgen’s valuations have remained stable, partly due to cost-related constraints for these drugs.

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Amgen’s blockbuster drugs Neulasta and Neupogen lost their patent exclusivity in 2015. The company doesn’t expect biosimilar competition for Neulasta by the end of 2016, which will allow the drug’s revenues to grow at a modest pace. In 2015, Neupogen lost its market share to biosimilar and branded competition by about 3%. This trend is expected to continue in 2016 and is expected to have a negative effect on the company’s profit margins. To learn more about Neulasta and Neupogen, read Amgen: Focusing on the Oncology Segment.

Analyst recommendations

In a Bloomberg survey of 29 brokerage firms recorded on March 18, 2016, about 50% of the brokers rated Amgen a “buy,” while 46.2% rated it a “hold,” and only 3.8% rated it a “sell.”

The consensus 12-month target price for Amgen is $180.40 compared to $144.10 on March 17, 2016. This implies a 25.2% return. If Amgen’s share price manages to realize this projection, it could have a positive impact on the iShares Nasdaq Biotechnology ETF (IBB). Amgen accounts for about 7.4% of IBB’s total holdings.

In the next part of this series, we’ll explore Amgen’s strategy for Repatha, its innovative cardiovascular drug, for the US market.

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