Written by the FALCON Team
Just recently, we published our monthly shortlist of companies passing our rigorous 3-step stock selection process exclusive for Seeking Alpha readers. After our latest article on Facebook (NASDAQ:FB), we now answer a reader’s request to perform a deep-dive analysis on biotech giant Amgen (NASDAQ:AMGN). We were curious how the company fares in our shareholder value-focused framework and decided to assess whether initiating a position may be warranted at current levels.
In light of Buffett’s teachings distilled from his 50+ years of shareholder letters, our analysis is based on the three dimensions that truly matter: operations, capital allocation, and valuation. Before we do that, however, let’s jump into what makes Amgen an interesting candidate today.
So, What’s The Story On Amgen?
Amgen Inc. is one of the largest publicly traded healthcare companies and a leader in biotechnology-based human therapeutics. It discovers, develops, manufactures, and delivers pharmaceutical products focusing on six different therapeutic fields: haematology/oncology, cardiovascular disease, nephrology, inflammation, neurology and bone health.
Although it is not uncommon in the biotech sector that one single blockbuster drug is producing 60-70% of a company’s revenue, Amgen has a highly diversified product portfolio with their two biggest money-makers, Enbrel (~$5B) and Neulasta (~$3B) combined accounting for 38% of sales in 2019. Neulasta sales have been substantially decreasing in recent years, caused by biosimilar launches, and the same is expected in Enbrel’s case due to more effective branded competition for the same indication potentially eroding Enbrel’s market share in the coming years, despite its valid patent until 2028. Besides its two key portfolio elements, Amgen still has some aces up its sleeve, with strong growth from newer blockbusters (already generating over $1 billion in annual sales) like Prolia and Xgeva, as well as from cholesterol drug