Amgen Still Has 'That Biotech Flair'; Credit Suisse Starts At Outperform

• Amgen, Inc. AMGN shares are down 5 percent since December 21.
• Credit Suisse’s Alethia Young initiated coverage of the company with an Outperform rating and a price target of $205.
• While Amgen is expected to announce near-term pipeline data, PCSK9 outcomes could be positive and the biosimilars peak sales higher than what the company projected, Young stated.

Analyst Alethia Young mentioned that the investment thesis was based on near-term pipeline data, a positive view on PCSK9 outcomes, a bullish stance on biosimilars, and confidence in the base business estimates.

Credit Suisse’s worst-case DCF valuation for Amgen stands at $168 per share, representing a $23 per share downside from the base case, and not including any pipeline, while reflecting a failed PCSK9 outcomes trial. The base case suggests $200 per share. The bull case of around $220 per share assumes 100 percent success to pipeline programs, Young commented.

Referring to the biosimilar market, Young said that the base-case scenario suggests peak sales of $4.3B. This is significantly higher than Amgen’s guidance of $3B in peak sales. Credit Suisse’s bull-case scenario is $7.2B in peak sales, which Amgen could generate if it is able to commercially dominate. This represents upside of $27 per share to the DCF.

The analyst pointed out that there were several pipeline catalysts in 2016, which are not reflected in the valuation. He cited these catalysts as Romo data, expected in the first half of the year, PCSK9 CV outcomes study and Ph2b migraine data, among others.