Forget Ozempic and Mounjaro, this firm is on the edge of a weight-loss breakthrough

Telegraph

13 hours ago

Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest.
This year, drug companies have been living under a cloud of uncertainty created by the Trump administration. Threats of tough action on drug pricing and tariffs have fuelled nervousness, while recently agreed cuts to Medicaid in the 'big beautiful bill' are also causing concern.
But medicine will always be a priority for the sick, and innovations from the pharmaceutical industry are vital for creating healthier societies as populations age.
Biotech giant Amgen looks particularly well placed to weather current uncertainties and prosper from the long-term prospects of its industry.
A first-class dividend record, which includes increased payouts in each of the last 13 years, is testament to the resilience of the business. Key to this is that unlike many rivals, no one product dominates Amgen's $33.4bn (£24.7bn) of sales.
In fact, the company boasts 14 blockbuster drugs with over $1bn sales each.
This product diversity means that while its biggest selling treatment – an osteoporosis drug called Prolia that generated $4.4bn revenues last year – is expected to see rapid declines following its loss of patent protection in February, the company's top line is forecast to grow.
The drugs Amgen sells cover a number of different areas, including cancer, cardiovascular disease, osteoporosis and rare diseases. Recent trading has been strong, too, with 21 drugs reporting record sales last year and 14 reporting double-digit growth.
Amgen is experiencing particularly strong growth from cholesterol drug Repatha, which is forecast to net $2.8bn this year, and osteoporosis treatment Evenity, both of which target underserved patient groups. Sales are also soaring for cancer drug Blincyto.
In terms of the problems posed by Trump, Amgen looks well placed. Tariffs should not be a major issue given it mostly manufactures in the US, where it is currently increasing capacity. Having just opened a new facility in Ohio, it plans to plough another $900m into growth in the state and a further $1bn is being spent building in North Carolina.
Much of this spending is aimed at increasing production of biosimilars, which are lower cost versions of existing drugs that have lost patent protection. This focus should help position the group to deal with the US government's drug-pricing agenda because biosimilars help lower healthcare costs.
Amgen has said Medicaid cuts could have a material adverse impact on some drug sales, however, the cuts passed in the big beautiful bill last week were scaled back in order to get it approved.
Reassurance about prospects can also be taken from the number of top fund managers backing the stock – all among the best-performing 3pc globally according to financial publisher Citywire.
A total of 14 of these individuals back the shares. The level of smart-money backing has won Amgen a place in Citywire's Global Elite Companies index, which is home to the 76 very best ideas from among the c.6,000 stocks held across the portfolios of the top managers Citywire tracks.
For these backers, the potential of Amgen's drug development is a key part of its attraction.
Investors have been particularly excited about a long-lasting obesity drug Amgen has begun late-stage phase III trials for, called MariTide.
It produces similar levels of weight-loss as Wegovy and Zepbound, which are multibillion-dollar treatments made by Novo Nordisk and Eli Lilly respectively, but MariTide only needs to be injected once a month or less, compared with weekly for the existing drugs.
While the potential is exciting, the market reacted negatively to recent news of high levels of nausea during early use. Amgen reckons it can address this by starting patients on lower doses.
Better trial news has recently come from cancer treatments, specifically a stomach cancer drug called Bemarituzumab. Amgen is also looking to extend the uses of some of its existing blockbuster medicines.
The company put a record $6bn into research and development last year pursuing new opportunities, which represented more than 18pc of sales and a 25pc increase on 2023.
While Amgen's margins have nudged down over recent years, it is nevertheless highly profitable. It reported 46.9pc underlying operating margins last year. Meanwhile, solid earnings per share growth is predicted over the next two years of just over 4pc on an annualised basis.
That looks an attractive package with the shares priced at 14 times forecast earnings and yielding 3.4pc, especially once the potential for positive surprises from the busy development pipeline is factored in.
British buyers of the shares need to fill out the correct paperwork to minimise withholding taxes and check for any extra dealing costs with brokers.
Questor says: buy
Ticker: NYSE:AMGN