Amgen Shares Move Higher Following Morgan Stanley Upgrade To Overweight

• Amgen, Inc. AMGN shares climbed 2 percent on December 14, while remaining below their 52-week high of $181.81.
• Morgan Stanley’s Matthew Harrison upgraded the rating on the company from Equal-weight to Overweight, while raising the price target from $160 to $193.
• Amgen’s shares could outperform in 2016, given two key pipeline readouts, a delayed impact of biosimilars and the current discount to Pharma, Harrison stated.

Analyst Matthew Harrison believes that there is a “clear path” to 2016 outperformance, adding that “the key to AMGN is PCSK9 upside versus biosimilar downside.”

Two Key Pipeline Readouts

The first is Amgen's sclerositin antibody romosozumab for osteoporosis. Phase III data for this is expected in 1H16. The other is Amgen's injectableanti-cholesterol drug Repatha, PCSK9 inhibitor. The cardiovascular outcomes data for this is expected in 2H16. “We believe both studies have a high likelihood of success,” Harrison wrote.

The 2020 estimates for romosozumab and Repatha sales have been raised from ~$700M to ~$1B and from ~$2B to ~$4B, respectively. “Drugs move drug stocks and we want to be exposed,” Harrison commented.

Biosimilar Delays

Using the legal route, Amgen has succeeded in delaying the launch of key biosimilar competitors, including Apotex's biosimilar Neulasta, which has likely been delayed until at least 3Q16.

“We acknowledge that biosimilars still remain a significant LT risk to Amgen with Sandoz's IPRs on Enbrel a key risk to watch for 2016. However, we also have not changed our position that Amgen's own biosimilar business could hurt pricing on its key product Enbrel and can never replace the margins of its branded biologics,” Harrison mentioned.

Apart from the two key pipeline readouts and delayed biosimilars impact, Amgen’s stock is at a “2 turn multiple discount to Pharma,” the Morgan Stanley report added.