Top Picks 2020: Amgen (AMGN)

01/16/2020 5:00 am EST


Mike Larson

Editor, Weiss' Safe Money Report

The biotechnology company Amgen (AMGN) — my more speculative favorite for 2020 — sells several different medical treatments, notes growth stock specialist Mike Larson, editor of Safe Money Report.

The firm's products include the infection-fighting drug Neulasta, migraine treatment Aimovig, cholesterol drug Repatha, rheumatoid arthritis drug Enbrel, and kidney therapy Sensipar. Enbrel is its biggest seller, at approximately 25% of sales, followed by Neulasta at 13%.

In the third quarter of 2019, Amgen posted adjusted net income of $2.2 billion, or $3.66 per share. That topped the average analyst forecast by 13 cents.

Revenue slipped 3% to $5.7 billion. But that wasn’t a surprise – and it was balanced by good news about strong “biosimilar” sales. Those are drugs Amgen sells that are relatively similar to competing products produced by rivals.

Amgen has also been active on the M&A front. It recently acquired the rights to Celgene’s Otezla psoriasis drug for $13.4 billion. That product generated around $1.6 billion in sales last year.

Plus, Amgen announced plans to invest $2.7 billion for a 20.5% stake in the Chinese biotechnology firm BeiGene (BGNE). The deal will give Amgen’s cancer drugs greater exposure to the Chinese market.

This will also allow the firm to profit if BeiGene’s pipeline of molecularly targeted and immuno-oncology products prove to be effective and ready for commercialization.

Amgen earned an upgrade to "Buy" territory from our Weiss Ratings system in August 2019. The firm also pays a generous quarterly dividend of $1.45 per share. That was good for an indicated yield of 2.7% in December 2019.

Furthermore, the shares broke out to a fresh all-time high on heavy volume late last year. And it goes without saying that biotechnology is not an industry affected by the vicissitudes of the U.S. economy. That makes this promising, relatively defensive pharma play a great addition to investor portfolios.

(Editor's note: Last year, Mike Larson chose Starbucks (SBUX) as his Top Pick; the stock gained 37% last year and the advisor has since sold his shares.)

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