Amgen 3Q numbers - concerns over key drugs

Amgen reported their numbers post the market close last Thursday evening. The stock was completely smoked. By Friday close of trade the stock had lost nearly ten percent, the worst single day loss for 14 years. Why? Was there anything fundamentally wrong with the numbers? At face value the results and guidance looked decent enough. There have been several concerns about their best sellers coming under volume and price threats. Let us be clear when we are talking about these pharma businesses that one is able to invest in, there is a very fine line between the company dedicating in the teens of revenues for research and development (looking for new life changing therapies), billions of Dollars and then the cost to broader society, who essentially pays after the therapy has passed all the regulatory requirements.

Humans are great inventors, they are also great inhibitors, humans that is. If you do not make these therapies, or incentivise people to search for these therapies, then you are unlikely to ever get them made. There are those motivated by science and invention, there are those who are motivated by profits, there are those who are motivated by believing that societies best needs to be taken into consideration. What history has shown us is that the market is normally the best leveler. If the therapies are too expensive, they won't sell. That said, what is a life worth? Much more than you will ever know, having lost my mother to a dreaded disease, I can see that there is no money in the world that could have saved her, eventually. Yet that didn't stop the family from trying whatever they could. See, a fine balance, and it is impossible to be objective.

OK, so let us have a look at the spread of therapies that Amgen have, Byron did a great job for all of us, he stuck it in a spreadsheet. It is a little too big to stick in here, follow the link to get the "larger image" - Sales update

Amgen has attracted a lot of heat after this reporting period, we view this as a huge opportunity to be able to acquire what is a well placed business, with a solid pipeline at a much cheaper price. The stock is trading near a year-to-date low. With a yield rapidly approaching three percent at current levels, a 14 historic multiple, we still feel major conviction on this business and by extension the share price. Buy.