Amgen is about to release earnings. Ponder this Bear Case Scenario and see if this is a Deep Value opportunity:
Medicare reimbursement (the chief payer for dialysis patients in the U.S.) for Epogen is now bundled with other dialysis drugs. This creates incentive to cut utilization. Not good for cash flow.
Clinical data has brought the safety of the entire ESA class of drugs into question, leading to restricted drug labels, reimbursement cuts, and pressure on Amgen’s sales growth. Clinical data will continue to be contentious and argumentative in all categories.
Generic versions of Amgen’s Epogen and Neupogen have entered Europe. These biosimilars will have a larger impact, as patents expire and a U.S. regulatory pathway for biosimilars is concluded.
Despite the fact that generic versions of Epogen and Neupogen have entered Europe, Amgen has successfully switched many patients to newer, more potent counterparts Aranesp and Neulasta. This might be a draw at worst.
Amgen has several drugs with annual sales surpassing $1 billion, and newer drugs like Sensipar and Prolia/Xgeva are adding to this list thanks to strong growth. Forecasting growth of new drugs is a difficult business. If the drug does well in the first year you have a winner.
Some late stage clinical research is encouraging for the R&D pipeline.
George Gutowski writes from a caveat emptor perspective.