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How Do Amgen’s Valuation Multiples Compare to Its Peers’?

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Valuation multiples

On November 2, 2016, Amgen (AMGN) was trading at a forward PE (price-to-earnings) multiple of ~10.6x. Since January 1, 2016, the company has traded at a PE multiple of between 10.3x and 13.5x.

Since January 2015, Amgen has traded at a premium to Gilead Sciences (GILD) but at a significant discount to peers Biogen (BIIB) and Celgene (CELG). Investors have been worried about future revenues for the company’s mature brands such as Neulasta and Enbrel. 

While Neulasta has already lost its patent protection, Enbrel’s patents are also being challenged by generic players. Older brands such as Epogen and Neupogen have also witnessed gradual falls in their revenues in 2016.

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Newly launched drug Kyprolis has been facing severe competition from other multiple myeloma players. Cardiovascular drug Repatha has been witnessing access constraints from the payer community. These challenges have resulted in slower-than-expected uptakes for these drugs. This has resulted in depressed investor sentiment for the company, negatively impacting Amgen’s share price.

Growth drivers

Despite concerns about its legacy brands, Amgen has been reporting strong revenue growth due to the robust performances of its drugs Prolia, Xgeva, Vectibix, Nplate, and Sensipar, among others. The company is also actively progressing its research pipeline in the cardiovascular arena with the investigational therapy omecamtive mecarbil. This drug, which Amgen co-develops with Cytokinetics and Servier, will be tested in a Phase 3 outcome study involving 8,000 patients suffering from chronic heart failure due to reduced ejection fractions.

If omecamtive mercabil manages to meet the primary endpoint in this trial, it could boost Amgen’s share price as well as the price of the iShares Russell 1000 ETF (IWB). Amgen makes up about 0.51% of IWB’s total portfolio holdings.

In the next article, we’ll explore growth prospects for Neulasta in 2016.

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