Amgen stock snagged an upgrade Wednesday and surged to a 10-month high as one analyst examined the biotech behemoth's post-Horizon future.
Leerink Partners analyst David Risinger says Amgen has an expanding pipeline optionality after finishing up its nearly $28 billion acquisition of Horizon Therapeutics. The transaction wrapped up last week, overcoming months of Federal Trade Commission scrutiny and adding both Tepezza and Krystexxa to Amgen's wares. Tepezza treats thyroid eye disease while Krystexxa is a treatment for chronic gout.
But Tepezza and Krystexxa weren't the driving force behind Risinger's upgrade.
"Our upgrade is both a multiple-expansion and earnings-upside call," he said in a report. "We expect the price-earnings multiple to expand due to accelerating pipeline news-flow, including oncology, obesity and cardiovascular disease. Most major pipeline candidates have the potential to launch late-decade."
Risinger upgraded Amgen stock to an outperform rating from market perform. He also boosted his price target on shares to 318 from 267.
Amgen Stock: Earnings Upcoming
The upgrade comes ahead of Amgen's third-quarter earnings report, slated for Oct. 31. Wall Street expects Amgen to earn an adjusted $4.67 per share on $6.93 billion in sales. Earnings would fall by 3 cents a share year over year, while sales would rise 5%.
Risinger says Amgen's acquisition of Horizon Therapeutics could be 8% accretive to earnings in 2024 and 15% in 2025. He also expects sales to hit $19.3 billion in 2031, up from his earlier projection for $14.3 billion. That would put Amgen's eight-year compounded annual growth rate at 5%.
On the stock market today, Amgen stock roared 4.6% to 283.60.
Risinger notes Amgen has three potential blockbuster cancer treatments in the works, including a rival to an experimental and promising drug from Mirati Therapeutics. These drugs aim to treat MTAP-deleted cancers, which account for 10% to 15% of all cancers, according to various reports.
This could help offset Amgen stock investors' unease after a Food and Drug Administration panel said the evidence behind the accelerated approval of Amgen's cancer drug, Lumakras, is insufficient. Mirati makes a rival drug called Krazati. Bristol Myers Squibb announced a deal to buy Mirati for up to $5.8 billion.
Amgen is also testing treatments for prostate cancer and small-cell lung cancer, Risinger said.
He expects "pipeline news-flow to drive upward pressure on long-term (analysts') expectations."
On Wednesday, Amgen stock jumped above a 5% buy zone. Shares broke out of a cup-with-handle base and a buy point at 268.24 on Sept. 20.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
