The biotech industry can be volatile even for relatively large companies. Amgen (AMGN -0.20%), one of the more prominent names in the game, just reminded us all of that fact. On Nov. 26, the company's shares dropped by as much as 12%. Unsurprisingly, the dip was due to clinical results the market filed under "not good enough."
However, if Amgen can bounce back, now might be an excellent time for investors to scoop up its shares. Let's find out what the future holds for Amgen after its massive one-day drop.
Amgen's weight loss candidate "flops"
Amgen is working on a potential anti-obesity drug candidate called MariTide. Like many other biotechs, the company is looking to get in on this therapeutic area, which happens to be the hottest in the industry right now. Companies like Eli Lilly and Novo Nordisk are making a fortune from their respective weight loss medicines. Newer ones will have to prove just as effective if not more, or have some other differentiating factor to make significant waves in the market.
Unfortunately, Amgen's MariTide failed to show greater efficacy than Eli Lily's tirzepatide in a phase 2 study. The biotech reported that MariTide demonstrated up to 20% average weight loss in overweight or obese candidates after 52 weeks of treatment with no observed weight loss plateau.
That's not bad, but oddly enough, Amgen did not publish data comparing MariTide's performance to the placebo group. In a phase 3 study, Eli Lilly's tirzepatide showed up to 22.5% weight loss after 72 weeks, compared to an average of 2.4% in the placebo group. MariTide hasn't gone against tirzepatide in a head-to-head clinical trial, so these comparisons aren't perfect. But the evidence so far doesn't support MariTide's being more effective than tirzepatide.
Is Amgen stock a buy?
There were some positive takeaways from MariTide's phase 2 data. The medicine is administered monthly (or less often) compared to tirzepatide's weekly regimen; some patients might be willing to go for the monthly dosing if it's somewhat comparable in efficacy to the that's administered weekly. Further, MariTide's study was 52 weeks, and no plateau was observed, which means that after 72 weeks, the average weight loss could be even more impressive.
In my view, MariTide is still in the running to become a notable player in the rising weight loss market, although the data Amgen released -- and the omission of the placebo-adjusted mean weight loss -- was a bit disappointing.
But Amgen isn't just a weight loss play. The company's lineup currently features many drugs generating over $1 billion a year. Amgen's financial results remain strong. In the third quarter, its revenue grew by 23% year over year to $8.5 billion.
Even excluding its October 2023 acquisition of Horizon Therapeutics, Amgen's sales increased by 8% compared to the year-ago period. Several of the company's medicines could earn label expansions. That includes Tezspire, a therapy for asthma that recently reported positive phase 3 data in treating chronic rhinosinusitis (inflamed sinuses). Amgen is also looking to make waves in the biosimilar market.
The company recently announced it would launch Pavblu in the U.S., the first biosimilar for Regeneron's blockbuster Eylea, which treats an eye condition called wet age-related macular degeneration. Amgen and Regeneron are still engaged in a legal fight over patent infringement, but the former has made it a point to develop lower-cost biosimilar medicines.
Lastly, Amgen is an excellent income stock, having increased its annual dividend per share by 249% in the past decade. Amgen still has a long pipeline and will continue to develop newer products. MariTide still looks somewhat promising, too. That's why I think the sell-off was a bit of an overreaction. Interested investors should strongly consider buying Amgen's shares now.
