Investors were not impressed by Amgen, Inc. (NASDAQ:AMGN) second quarter results because they showed declining prescriptions sales, which point towards slowing profits, raising concerns that the company might face growth problems in the future. However, several analysts think that now is the best time to load up on Amgen, Inc. (NASDAQ:AMGN). The stock has a decent pipeline and a massive dividend yield.
First, let’s analyze the concerns analysts have regarding Amgen, Inc. (NASDAQ:AMGN) growth trajectory.
An Empty Pipeline?
Leerink Partners analyst Geoffrey Porges said in a report after the earnings report that Amgen’s new products are performing “nicely” but they don’t have enough potential to make up for the legacy products, which are flat in terms of growth. Porges also warned investors that Amgen’s pipeline is devoid of Phase 3 assets. He urged the company to show an “urgency” to find and create new alternatives to its flattening drugs.
Investment firm Baird analyst Brian Skorney also said in a report that Enbrel’s inventory swelled to $140 million, which would affect the company badly in the second half of 2017.
Why Should You Buy Amgen, Inc. (NASDAQ:AMGN)
Amgen’s pipeline situation is not that bleak. The company has 13 drug candidates which are in Phase 3 evaluation. Amgen, Inc. (NASDAQ:AMGN) has a huge focus on the oncology market, the market it is expected to reach $150 million value by the end of 2020.
Amgen, which is the largest biotech companies in terms of market cap, saw a growth trend for its arthritis treatment Enbrel and cholesterol lowering drug Repatha. In addition, it has several new drugs which are performing decently. These news products include Repatha, Blincyto and Kyprolis. Amgen recently got a green signal from the FDA regarding the addition of heart safety in the list of Repatha treatments. In March, Amgen proved the usefulness of Repatha in reducing the chances of deadly cardiovascular events by controlling low-density lipoprotein cholesterol (LDL-C). If Amgen gets an FDA approval for Repatha as a heart safety treatment, it will be a huge success for the company and Repatha revenue will soar. In the second quarter, Repatha revenue increased to $83 million, up from $27 million in the second quarter of 2016.
The company is also working on a cost cutting program and taking float reduction initiatives. Amgen has a $1 billion stock repurchase program. Margins are expected to soar in the coming quarters.
Amgen has impressive cash flow. The company generated $2 billion in free cash flow in the quarter. This means Amgen will continue to spend money on R&D, which would result in new drugs in the future.
Amgen, Inc. (NASDAQ:AMGN) has one of the healthiest dividend yields (2.64%) in the industry. The company increased its dividend payout for the third quarter to $1.15 per share.
The stock has gained about 18% since the start of this year and earned $3.26 per share in the second quarter, which shows earnings growth of about 17.6% year over year.