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Amgen: Looks Attractive For Long-Term Investors

 April 26, 2012 12:49 PM

(By Mani) Biotech firm Amgen,Inc. (NASDAQ: AMGN) should be a good bet for long-term investors given a strong pipeline, room for dividend increases, and additional share buybacks.

Amgen focuses on developing novel biotherapeutics primarily in cancer, nephrology, inflammatory diseases, and now bone diseases. Amgen pioneered the use of recombinant DNA to produce some of the world's most successful blockbuster biotech drugs.

The company's core business is its erythropoietin (EPO) stimulating agents (ESAs such as Epogen and Aranesp) and neutrophil stimulating (Neupogen, Neulasta) franchises. The company's primary future growth driver is denosumab (Prolia) which is used to treat post-menopausal osteoporosis (PMO) and bone cancer.

[Related -Amgen, Inc. (NASDAQ:AMGN): What Will Drive Amgen This Year?]

"We think AMGN is an attractive long-term value stock with 1) potential for overall streamlining and cost cutting like big pharma, 2) room for much dividend increases (2% yield vs 4% pharma) and more share buybacks, 3) less generic erosion than pharma over the long-run (biologics not small molecules)," RBC Capital Markets analyst Michael Yee wrote in a note to clients.

During the first quarter 2012, Amgen repurchased about 21 million shares of common stock at a total cost of $1.4 billion. The company currently has $3.6 billion remaining under its repurchase program.

Amgen is upping its ante on acquisitions as it agreed to buy 95.6 percent of shares in Turkey's Mustafa Nevzat Pharmaceuticals valuing the company at $700 million. Yee said would like to see more deals, particularly for an oral Rheumatoid arthritis/psoriasis drug.

[Related -Amgen, Inc. (AMGN) Q3 Earnings Preview: Pipeline In Focus]

Amgen recently reported a five percent rise in first-quarter earnings on strong sales of its lead infection drug Neulasta and Xgeva. Thousand Oaks, California-based Amgen earned $1.18 billion or $1.48 per share, compared to $1.12 billion or $1.20 share last year. Excluding items, it earned $1.61 per share, topping Street view of $1.45 per share.

Amgen's first-quarter revenue rose 9 percent to $4.05 billion, which came in above the consensus revenue estimate of $3.93 billion.

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