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Amgen Q3 numbers

Amgen, one of the newest additions to the Vestact recommended stock stable, reported numbers post the market last evening. This is a company that I have been watching for about 8 years, back when Lehman Brothers still housed employees and actually had a family. The numbers were for Q3 and were a pretty solid beat, guidance was also a little higher than the previous range. Preliminary guidance was released for 2016 too, the group expects revenues in the region of 21.7 to 22.3 billion Dollars for that financial year, with EPS in the region of 10.35 to 10.75. The share price closed last evening at 162.67, in simple terms the share price trades in the middle of the guided range (10.55 USD EPS) on 15.4 times earnings. The yield at current levels is just below 2 percent.

Nice, what do they do however? Their Google finance profile pretty much sums it up: "Amgen Inc. (Amgen) is a biotechnology company. The Company is engaged in discovering, developing, manufacturing and delivering human therapeutics. The Company's sales and marketing forces are located in the United States and Europe." What are human therapeutics? Therapies that are extracted from biological sources. They are looking to produce cost effective therapies based on advances in cellular and molecular biology, says their business mission statement.

The business itself was started with three biological sources, three people, 35 years ago. The first CEO, George Rathmann, worked from a trailer to give his scientists space in the lab. That is how you achieve economic freedom. The company listed in 1983, looking to raise money early on. A young researcher, Fu-Kuen Lin and his team worked round the clock for two years to produce one of the most successful drugs in biotech history, EPOGEN.

If that sounds familiar it is associated with cycling and all the wrong reasons around the most famous bike rides of them all, the Tour de France. EPOGEN (third largest drug in terms of sales for the company) is used to treat patients with low amounts of red blood cells, a condition known as anaemia. And it is normally used to treat people with chronic kidney conditions, people who would be on dialysis. It helps the body create more red blood cells and raises hemoglobin levels. You can see why healthy humans would benefit from taking this drug whilst participating in sport. The company also managed to deliver another blockbuster by the mid eighties, NEUPOGEN. It helps your body produce more white blood cells, and is particularly useful when people are undergoing chemotherapy.

The company continued through to present day, producing other blockbusters like ENBREL (currently their number one drug by sales), which treats Psoriasis and Rheumatoid Arthritis, as well as Ankylosing spondylitis. ARANESP is used to treat anaemia that is caused by both kidney failure or chemotherapy, SENSIPAR is another therapy used in the treatment of adult patients for secondary hyperparathyroidism, as a result of being on dialysis. You see the theme here. More recently Amgen have been involved in drugs that treat cancers, VECTIBIX, which treats colon or rectal cancer, equally in woman genome therapies, PROLIA treats postmenopausal osteoporosis, high risk patients.

AMGEN have also recently acquired businesses that treat speciality caners, rare forms, as well as tricky to treat. Kidney, liver, leukaemia, that realm. A more recent therapy is Neulasta (their second biggest seller), which is also used in helping the body create more white blood cells whilst you undergo chemotherapy. Kyprolis (their fastest growing drug by revenue, up 46 percent quarter-on-quarter) is used to treat multiple myeloma, a cancer of the plasma cells.

More recently, Corlanor, which treats heart disease and as recent as the end of August, Repatha, which is an injectable prescription medicine called a PCSK9 inhibitor. What is that? They dramatically lower LDL cholesterol levels. LDL is Low-density lipoprotein, the bad cholesterol. Do you feel like you should have been paying more attention in your biology and chemistry lectures? I don't blame you. Just two days ago the FDA approved one of Amgen's therapies, IMLYGIC, (and I am going to copy and paste from a release) "the first FDA-approved oncolytic virus therapy, for the treatment of melanoma lesions in the skin and lymph nodes." Skin cancer is still the most common kind of cancer in the USA.

Why own a company like this? It is a simple question. They spend nearly one-fifth of all revenues in research and development, they are hugely cash generative. Plus, to be frank, I would rather much own a company and part with my money to own a piece of a business that is trying to cure humanity. The therapies may be wildly expensive, there may be an ethical argument to cost of the treatments, without that, the company would not be able to recoup the money spent engaging in finding these cures. They are busy working on a breakthrough drug (known at the moment as AMG334, developed in conjunction with Novartis) that would treat episodic migraines. As well as other biosimilar therapies, for treating breast cancer, lung cancer, as well as arthritis/Crohn disease/ulcerative colitis biosimilar, adalimumab is the Monoclonal antibody. Now you really wish you had paid attention!

The company is in an exciting space currently, there are plenty of opportunities, the stock is up only 2.2 percent year to date and looks cheap in their respective peer grouping, well placed to acquire bolt on businesses if needs be. And with the bigger pharma companies shopping for biotech companies, who knows! We add Amgen as a buy to our core grouping of stocks.


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