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Amgen 4Q and full year numbers

Amgen reported numbers for the fourth quarter and full year last week Thursday, after the market closed. This stock is new to the recommended list, perhaps a refresher on what the business does is in order. The company treats serious illnesses, that includes cancer, kidney diseases, rheumatoid arthritis and bone diseases, primarily. The company uses (a lot of this is from their website) advanced human genetics to firstly understand the conditions, before researching and manufacturing at the highest possible standard.

It is what the market refers to as a biotechnology company. The company has been around since 1980, the company was founded in that year in Thousand Oaks in California. They do have a presence here in South Africa, it seems from a web snoop that their business is just off Ballyclare Drive in Bryanston, in the Ballyoaks Office Park. That is very close to where Michael used to live. Amgen has been listed for a long time too, since mid 1983. In that time the stock has delivered a return (without dividends) of 44375 percent, five stock splits later. Why, oh why, Grandad, did you not pick this one? Or at least work there, along with the other 18 thousand odd folks who no doubt have stock options.

Whilst the stock is heavily owned by institutions and mutual funds, nearly 88 percent owned, the spread of shareholders is decent enough. There is however one institution, Capital Research Global Investors which owns 13 percent of the business. Capital Research Group is a private financial services business that manages over 1.4 trillion Dollars worth of money, a big and solid "partner" to have. Other big holders include all the usual suspects, I noted that Bill Gross' new employer, Janus Capital, owns over 2 percent of the stock. Third Point, a fund run by high profile investor Dan Loeb owns 1.37 percent of the company, not huge, enough to make you sit up and notice who you are alongside as an investor however.

The numbers quick sticks, for the full year, as those are available. The company produced revenues of 21.662 billion Dollars, an increase of 8 percent on the year. The company spends an enormous amount on R&D - Research and Development (looking for the next huge therapy), 18.7 percent of all revenues. That is a big, big number, one in six Dollars they make are trying to advance the causes of humanity further. Net income clocked 7.954 billion Dollars, adjusted EPS for the year of 10.38 Dollars represented an increase of 19 percent on the year prior. At 152.73 Dollars, where the stock closed on Friday evening, the valuations certainly look attractive. And whilst spending a lot of money on R&D, the stock still yields 2.62 percent at these levels.

The company also gave guidance for the full year in the conference call, revenues expected to be between 22 to 22.5 billion Dollars (ahead of previous guidance), with adjusted EPS expected to be between 10.60 to 11.00 Dollars. Also, ahead of the previous range. Again, forward the stock looks really good value, bearing in mind that the margins are superb and the fact that the company is in a spot that is really sweet.

The company has six flagship products that generate around half of their revenues, Enbrel (treats five diseases including Rheumatoid Arthritis, ankylosing spondylitis and types of psoriasis), Prolia (treatment of postmenopausal osteoporosis), XGEVA (similar to Prolia, bone problems), Sensipar (treats secondary secondary hyperparathyroidism in adult patients with chronic kidney diseases), Vectibix (treatment of metastatic colorectal cancer), and Nplate (treats low blood platelet count in patients with chronic immune thrombocytopenia, a blood therapy).

These treatments are all pretty specific and are designed to improve the lives of their patients significantly, highly specialised therapies. There were good gains shown in sales of Kyprolis, used for the treatment of multiple myeloma, again a blood cancer therapy. Some of their legacy medicines like Neupogen (a support therapy whilst you are on chemo) and Epogen (red blood cell anaemia treatment, made infamous by Lance and his friends) are experiencing competition from cheaper sources. Equally some of the much newer therapies like Repatha (high cholesterol treatment) are making progress, and quickly at that.

There are some very interesting therapies at an advanced stage that look exciting, including migraine therapies, breast cancer therapies and inflammatory diseases. This is an exciting area to invest in, I think the last time that I looked at this company, the conclusion was similar. You can part with your hard earned funds and own a business that contributes to humanity in a positive fashion, like Amgen, and I would much rather be in that boat than in another business selling products that cause the diseases they are looking to cure. Personal preference. We have added aggressively to the stock and will continue to recommend this company as a strong buy.


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