The company focuses on six therapeutic areas: cardiovascular disease, oncology, bone health, neuroscience, nephrology, and inflammation.
Amgen reported second-quarter earnings results on 8/3/21. Revenue increased 5.2% to $6.5 billion, beating estimates by $80 million. Adjusted earnings-per-share (EPS) of $4.38, increased 4.3% from the same quarter last year. Adjusted earnings-per-share was $0.37 above expectations.
Amgen reaffirmed revenue guidance of $25.8 billion to $26.6 billion and adjusted earnings-per-share of $16.00 to $17.00 for 2021.
Amgen’s competitive advantages include its strong pharmaceutical assets as well as its robust pipeline. Amgen spent 17% of its 2020 sales on research and development. The company also expects capital expenditures of $900 million for 2021, up from $600 million in 2020. As a result, it has a well-stocked pipeline to fuel its future growth.
Amgen has also demonstrated resilience during recessions, as people will seek treatment for their health issues regardless of economic conditions. The firm has a reasonably low payout ratio of 43% expected for 2021, which will allow it to continue to raise its dividend going forward, even in a prolonged recession.
We expect 9% annual earnings-per-share growth over the next five years for Amgen. This earnings-per-share growth will be achieved through a combination of rising revenue as well as share repurchases.
We also expect the company to increase its dividend by 9% per year over the next five years, in-line with its earnings-per-share growth rate.
While Amgen is struggling with falling sales for legacy products such as Neulasta and Enbrel, new products are generating growth.
For example, the osteoporosis drug Prolia had sales growth of 24% due to 20% volume growth in the second quarter, because of new and repeat patients. Sales for cholesterol drug Repatha rose 43% last quarter due to 49% volume growth.
Share buybacks will boost earnings-per-share growth. Amgen repurchased 6.5 million shares at an average price of $246 during the quarter. Amgen has $3.9 billion, or about 3% of its market capitalization, remaining under its existing share repurchase authorization.
Expected EPS growth of 9% and the 3.1% dividend lead to total expected returns of 11.3% per year over the next five years.