Amgen seeks new medicine against obesity. Challenge on rare diseases

On the one hand - together with the efforts on oncology, general medicine and inflammatory diseases - the new challenge on rare diseases. On the other the focus on biosimilar drugs. All this with the bet on anti-obesity treatments. These are among the priorities of Amgen to support the business.

Yes, the business. In 2023, the biotech giant realised a turnover of USD 28.2 billion (+7% compared to 2022). GAAP earnings per share, for its part, rose by 3%. The non-GAAP operating margin - the ratio of operating income to revenue -, on the other hand, beat the headline: from 50.5% in 2022 to 49.8% last year. In the face of such data, the stock market penalised the share price. Why? There are several reasons. First and foremost some point to the decline (-53%) in GAAP eps in the last quarter of 2023 due to, among other things, the acquisition of Horizon Therapeutics. Others, however, point to the decline (-3%) in average selling price in 2023. True! Volumes have more than compensated for the dynamic, but the trend has been seen as a possible alarm bell. Finally, there are those who - pointing out that Amgen's share price had risen a lot before the last quarterly report - attribute the recent trend to profit-taking.

Be that as it may, the volatility of the stock is not surprising. Particularly because there are several fronts on which Amgen has placed its bets. These are areas from which the company and the market are expecting, either now or later, a big boost to the income statement. This is the case, for example, with the new rare diseases division. This was created in the wake of the shopping spree (consolidation as of 6 October 2023) of Horizon for some USD 27.8 billion. The transaction made it possible to add further medicines to the 'orphan' drugs already in house (164 million sales in 2023). In this sense, among others, Tepezza may be mentioned. That is: the treatment against thyroid orbitopathy, which - from 6 October to the end of December 2023 - generated sales of 448 million. Then there is Krystexxa, which is a medicine to treat severe forms of chronic gout (272 million). Or again: Tavneos, the drug against rare inflammations of the blood vessels (134 million turnover). In short: the prerequisites, together with the efforts on research and development, are so significant that Amgen expects the focus on rare diseases to accelerate revenue growth and contribute to the increase in non-GAAP profits from 2024 onwards. All as easy as a glass of water, then? The reality is more complicated. Any acquisition has within it an 'execution risk'. On the one hand, the company indicates that the integration is proceeding positively; but on the other hand, the biotech group says that it has an impact on the operating margin. In other words: the non-GAAP indicator should settle at around 43% in the first quarter. Then, as synergies also start to materialise (a 500 million reduction in pre-tax costs is expected in 2026), the indicator should improve to around 48% for the full year 2024.

From the world of orphan diseases to that of anti-obesity drugs. The latter is an expanding sector with strong potential. In 2023, according to Goldman Sachs, the sector was worth around USD 6 billion and by 2030 it could reach around USD 100 billion. No wonder, then, that the race to produce slimming drugs has long since begun. It is a race where some competitors have already made their mark. First and foremost, there is Eli Lilly. The US pharmaceutical group last November received the OK - from both the US Fda and the British Mrha - for Zepbound (trade name of the anti-obesity treatment). Well, it was precisely the prospects for the medicine in question that contributed to Eli Lilly's leap in the last 12 months on the stock exchange. Similar is the case for Europe's Novo Nordisk. The Danish company, which topped the Old Continent in terms of capitalisation in 2023, was boosted by 'its' Wegovy. That is: the slimming drug (also approved for the US in March). The stock rally - although the shares have recently retraced - has driven up the price/earnings ratio. At the end of 2023, Eli Lilly's p/e was 63.7, according to the Bloomberg terminal. Novo Nordisk's, on the other hand, stood at 37.4. As of 16/4/2024, the indicator is worth 77.8 and 46.3, respectively. The forward-looking one, on 2024, finally, stands at 58.7 (Eli Lilly) and 36.9 times (Novo Nordisk). In short: the market has also priced in the two companies' opportunities in the obesity sector. Of course! The dynamics of the indicator is clearly the effect of a further multiplicity of causes, linked to the individual company histories and sector. Moreover, p/e alone tells a small part of the financial realities in question. That said, however, the underlying suggestion remains. Traders are betting on the prospects of anti-obesity drugs. And, now, they seem to do so with Amgen itself. The latter does not yet have an approved drug. The group is developing two molecules. In particular, the focus is on the injectable treatment called MariTide, for which updates on the phase II clinical trial are expected in 2024. Apart from the specific process, the fear of the saver is that Amgen is entering a market that is already dominated by competitors. The fear is not shared by the company. The company, in talks with investors, responds that it has a different approach from which a differentiated molecule will be derived: a drug - this is the indication - which, on the one hand, could only require monthly dosing; and which, on the other hand, would allow more effective, rapid and even lasting weight loss. Not only that. The group claims that, potentially, there could also be benefits with respect to other diseases caused by excess fat.

So far, some suggestions regarding obesity and rare drugs. Amgen, however, has three other strongholds - where, moreover, research and prospects on new molecules are always fundamental - regarding the business: general medicine, oncology and inflammatory diseases. In the first area, the group boasts major blockbusters: from Rephata ($1.6 billion sales in 2023) to Prolia ($4.01 billion) to Evenity ($1.16 billion). In particular, the group, with respect to the two latest drugs (aimed at treating bones), sees excellent prospects, also in the wake of the spread of osteoporosis. On the front, instead, of the fight against cancer - where there are Krypolis (1.4 billion) and Xgeva (2.11 billion) - on 12 June there should be the final outcome of the procedure at the FDA concerning Tarlatamab. That is: the potential solution against small cell lung cancer. Finally: inflammatory diseases. On this topic, in addition to Enbrel (3.7 billion), there is Otezia, a therapy against psoriasis in which Amgen says it wants to continue to invest strongly, including through the exploration of new patents.