Health and Healthcare

Why Amgen Is Called to Outperform Large-Cap Biotechs

Chris Lange

Published: September 24, 2020 3:36 pm

In 2020 investors have been forced to dial down expectations in biotech if their business ambitions are not tied to COVID-19. The reality is that all of the world’s other health problems have not gone away. These still need ongoing treatments and cures, and valuations in the top large-cap biotechs are just not expensive and they should have plenty of earnings resilience compared to non-health sectors in the recession. Amgen Inc. (NASDAQ: AMGN) made history by recently becoming the first biotech company to ever join the Dow Jones Industrial Average. Credit Suisse sees more than 20% upside ahead.

Credit Suisse’s Evan Seigerman and the research team have an Outperform rating and $290 price target that implies more than 20% upside, and Amgen has a 2.6% dividend yield to boot.

The brokerage firm noted that the overall response rate (ORR) in the 960 mg cohort for non small cell lung cancer fell to 35.3%, but the overall median duration of response (mDOR) of 10.9 months was strong.

Credit Suisse said this in its report:

We would characterize these data as better than expected and generally positive given the ORR in the mid-30% range for the 960 mg cohort. We also note that the mDOR of 10.9 months is well above the six-month benchmark and is across all dose-levels and that the data are not yet mature enough for a mDOR calculation in the 960 mg cohort.

We still believe that a 30% ORR with at least 6 months duration of response remains the low-end of the bar for potential approval as monotherapy. In our view this data is not a “grand-slam,” but we would consider this to be highly encouraging for the ongoing KRAS G21C development programs of both AMG 510 and MRTX 849.

Separately, Amgen’s Dr. David Reese, EVP of R&D, and Dr. Gregory Friberg, VP of Global Development and Oncology provided some additional color on the firm’s broader Bispecific T-cell Engager (BiTE) platform.

Overall, the aim of the BiTE platform is to represent an ‘off the shelf’ T-cell-based therapy and to move into earlier lines of therapy as the program develops (potentially in combination with checkpoint inhibitors).

Management believes the efficacy demonstrated in metastatic castration-resistant prostate cancer (mCRPC) is encouraging for other solid tumors even though each target’s safety profile is likely to be different. The development cycle is still in its early stages.

Amgen stock was last seen at $238.49, with a 52-week range of $177.05 to $264.97. The consensus analyst price target is $262.76.