Shares of Amgen (AMGN -0.20%) are down by 6% in the last 30 days as I write this -- a larger-than-normal amount for a large pharma company's stock to fall, especially considering that the market rose nearly 3% in the same period. The clear culprit for the drop is, quite regrettably for shareholders, an unintentional disclosure of clinical trial information that the market found to be rather unappetizing.
But does that change the investment thesis for buying the stock, or is it just a blip?
This revelation is easy to read as bearish
During clinical trials, especially those in phase 1 safety testing, investigators are obligated to capture a wide variety of biometric data, including for many factors that are of unknown or ancillary importance. If some of those factors end up containing questionable (but not alarming) safety signals, it's generally a lot better for the stock when a company discloses what it knows up front. The alternative is for either investors or regulators to find out during the drug's approval process. Or, in Amgen's case this time around, another alternative is for investors to find out at a random point in time and be left to rationalize whatever is discovered without useful context provided by management.
On Nov. 12, a Wall Street analyst identified a previously unnoticed piece of data included in Amgen's phase 1 trial results for its anti-obesity candidate called MariTide that were published roughly nine months ago. The data was in a "hidden" Excel tab that the analyst opened up.
The piece of data of particular interest here indicates that a group of four patients dosed with the highest tested dose of the candidate experienced a loss of 4% of their bone mineral density on average during the 12 weeks of treatment; other previously "hidden" data showed the decline in the average was caused by a steeper loss in one patient in particular.
In a press release after the "new" data was reported, Amgen said the phase 1 study results "do not suggest any bone safety concern or change our conviction in the promise of MariTide."
What's it mean?
Put differently, at least one patient in the MariTide program experienced a loss of bone density. Such a loss could potentially be consistent with the downstream effects of a patient losing a lot of weight over a short period of time, or it could be the result of a medical condition unrelated to treatment altogether. Or something else could be going on. No matter the cause, it does not appear that the extent of this person's bone density loss reached a degree that caused alarm to the clinical investigators running the trial, nor did it prompt Amgen to report the issue as a known risk for a side effect.
On its face, there is no big emergency for shareholders here. Remember, the anti-obesity medicines on the market right now, produced by Eli Lilly and Novo Nordisk, have side effects, some of which are burdensome. Furthermore, there may be long-term health risks associated with using those medicines. But they're still sold, and, at least for now, the overwhelming majority of patients who take them do not experience the worst outcomes. So there's no reason to believe that MariTide's ongoing phase 2 clinical trials will be halted, nor is there reason to believe that its addressable market is decreasing in size as a result of the new data.
Assuming there's no more concerning data generated that corroborates the bone density issue in more patients, that is.
The details matter here, and so does getting the full story
There isn't any ambiguity here: Amgen's stock is still worth buying today.
MariTide is just one promising program among many in its large pipeline, several of which could be approved for sale and commercialized sooner. In Q3, its earnings per share rose by 62% to reach $5.22 as a result of the strong performance of the drugs it already has on the market. The company is going to continue to grow at a good clip in the near term, and there aren't any warning lights flashing about its ability to navigate the next few years in a similarly rewarding fashion.
But, the reality of the matter is that the company will now need to go out of its way to reassure investors that there is indeed no problem with MariTide. Given the data that we have today, it almost seems unfair to describe the risks facing the program to be higher than before. Nonetheless, this is a situation in which shareholder skittishness could be a problem if there's any further whiff of trouble, whether or not it turns out to be substantiated.
So, be aware that buying Amgen's stock specifically with the goal of getting exposure to its potential growth from entering the market for anti-obesity medicines is now a shade riskier than it was before. Considering that there are still mid-stage and late-stage clinical trials to wrap up with MariTide before the candidate would have its shot at approval, the additional risk is not a dealbreaker in the big scheme of things. And, with a bit more data, it's entirely possible that the newfound questions about MariTide will be put to rest.
