Dr. Richard Evans
Amgen Inc.
AMGN-Q
DON'T BUY
Jan 25, 2017
If you look at their operating economics, they are very much like a large Pharmaceutical company. Relatively slow moving. Their rate of innovation and patent expiration on all products kind of match, so there is not a lot of upside. The growth that has occurred, much of it on a trailing basis, has come from rising prices on their rheumatoid arthritis drug, but will no longer be able to do that. His belief is that prices are coming down.
Trades at a healthy 15x earnings and 66% gross margin (56% in the sector). It pays a 3% dividend. They just bought Horizon Therapeutics which adds growth. Their early-stage obesity drug shows great promise in a $100 billion potential market.
They just bought Horizon Therapeutics, a growth engine, and have a weight-loss drug in phase 2 trials that is promising facing a huge market. They trade at a decent PE and enjoy good growth from their core drugs.
Today's downgraded doesn't bother him. These calls go back and forth often. Their weight-loss drug could add $10 billion revenues. A good time to own this.
A dividend play for 2025 at 3.65%. Not sexy, but consistently generates earnings, free cash flow, and each year grows its dividend. Offers growth wealth generation over time.
Phase 2 drug in the GLP-1 space -- not as mature as LLY's drug, but you don't pay as much for this company either. Trades ~14x earnings, compared to 50x for LLY. And that's more his style of investing.
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If you look at their operating economics, they are very much like a large Pharmaceutical company. Relatively slow moving. Their rate of innovation and patent expiration on all products kind of match, so there is not a lot of upside. The growth that has occurred, much of it on a trailing basis, has come from rising prices on their rheumatoid arthritis drug, but will no longer be able to do that. His belief is that prices are coming down.