Although both leading biotechnology stocks fell recently after reporting earnings, John Buckingham continues to see long-term value in Amgen (AMGN) and Gilead Sciences (GILD); here is the latest from his advisory letter, The Prudent Speculator.

Formerly high-flying Amgen reported terrific Q4 financial results. The biotech titan turned in revenue of $8.19 billion, ahead of the $8.12 billion consensus analyst estimate.

Adjusted EPS came in at $4.71, versus the average Wall Street forecast of $4.60. Sales growth was noteworthy in certain general medicine drugs, including Repatha (+25% y/y), Evenity (+41% y/y) and Amgevita (+34% y/y).For 2024, Amgen expects total revenue in the range of $32.4 billion to $33.8 billion.

AMGN also sees adjusted EPS for the full year of $18.90 to $20.30, with capital expenditures of approximately $1.1 billion. Management expects the Horizon acquisition to be accretive in 2024 and generate approximately $500 million in pretax cost savings by 2026.

All that sounds terrific, and while some would argue the stock was due for a pullback after a sensational run over the last 12 months, the problem for short-term traders seemed to be that trial data for several obesity therapy candidates did not impress several prominent analysts who chose to downgrade or talk down the stock.

With the stock still top-ranked in our proprietary scoring algorithm, we saw the glass as half full and continue to think there is more upside available for AMGN. The firm's obesity therapies have the potential to turn into big winners for Amgen because the addressable market for such drugs is massive.

After posting a double-digit return last year, shares trade at 15 times next 12-month adjusted EPS projections and offer a dividend yield of 3.1%. Our Target Price has been boosted to $340.

Meanwhile, pharmaceutical maker Gilead Sciences earned $1.72 per share (vs. $1.74 est.) and had revenue of $7.12 billion (vs. $7.10 billion est.). Management said its ex-Veklury product base gained 7%, which largely offset the revenue decline for the broad-spectrum antiviral that was a popular COVID-19 treatment.

The company’s largest segment, Biktarvy, saw a 6.5% y/y revenue gain to $3.11 billion in Q4. The quarterly dividend was hiked 2.7% to $0.77, resulting in a dividend yield of 4.2%.

Due to the strong demand for its cancer business and solid growth of its core HIV products, the biotech raised guidance for full-year revenue and earnings. Gilead now expects earnings of $6.65 to $6.85 per share, up from a range of $6.45 to $6.80. The company foresees revenues in a range of $26.7 billion to $26.9 billion, up from a previous forecast of $26.3 billion to $26.7 billion.

GILD is targeting the launch of 10 ‘transformative’ therapies by 2030, while there are a dozen updates expected this year for the company’s oncology research. We are encouraged to see GILD’s continued strength in its HIV franchise with new treatments centered around new injectable products for treatment and prevention.

Robust cash-flow generation provides additional spending for R&D and/or additional bolt-on acquisitions. Shares have fallen 9% this year and there remain challenges on the horizon bringing therapies to market, but the discounted valuation and solid yield help us stay extra patient with GILD. Our Target Price is now $94.

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