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On Tuesday night Amgen released results that looked decent. Revenues were in line with expectations and profits comfortably beat the Wall Street forecast. Unfortunately, forward guidance looked a little soft so the share took a hit during Wednesday's session, down over 6%.
Amgen is a very profitable business, but its share price has had a poor run in the last year, especially compared to the rest of the market. They have a solid portfolio of drugs which generate over $10 billion a year in profit. It trades at 12 times forward earnings and a 3% dividend yield. That ticks a lot of boxes.
We need a catalyst to get this one going, like an FDA approval for a new blockbuster drug that will save lives and make them huge amounts of money. That has not happened much lately, and the FDA is typically very cautious. Amgen has an enormous research budget, and is working hard on its drug pipeline. In the meantime, we can rely on the existing portfolio to keep earnings ticking over and generating cash to pay that quarterly dividend.
Amgen is a portfolio holding to be patient with. This is a better investment than a small pharma company with a potential one-hit wonder drug. Let's hold the line.
