Bank of America Merrill Lynch hosted investor meetings with the Amgen, Inc.’s (NASDAQ:AMGN) CEO, CFO and IR in Asia this week. Though investors were underwhelmed by FOURIER results presented at ACC (American College of Cardiology) last month, physician feedback was positive and Amgen has been engaging payers on broadening patient access to Repatha. It is worth pointing out that the reduction in risk of heart attack and stroke is even more pronounced beyond year 1 of therapy. Payers recognize the outcomes benefit; however, they are restricted by pharmacy budget. Amgen offers multiple contracts ranging from LDL, outcome, and fixed per-member per-month based pricing. Given that 11M US patients have not reached optimal LDL and significant risk reduction, Amgen believes Repatha is on its way to become one of the largest selling products. Revised treatment guidelines and FDA label will likely catalyze higher uptake.
Amgen is generally pleased with the proposals by the Trump administration including less regulation and lower corporate tax. The company likely will not see significant impact from a lower tax rate; however, Amgen is highly interested in cash repatriation with $36B in overseas cash. Aiming to maintain the lowest possible WACC, Amgen prefers share buybacks. While Amgen continues to scout for acquisitions, its M&A strategy does not hinge on tax reform. Premium for late-stage assets makes it difficult to create value.
Despite the controversy of drug pricing and proposal to roll Medicare Part B benefit into Part D program, Amgen believes the odds of any draconian measures being legislated are low. The Trump administration is particularly focused on jobs and would not push for policies that could result in job loss in the biopharma industry, which is a significant employer in the US. Consumers are concerned about their out-of-pocket payment, not the gross price. Rebates do not benefit consumers directly and Amgen supports transparency in pricing.
Amgen has seen revenue erosion from biosimilar competition and is gearing up for Neulasta competition. Amgen expects a discount of 15-25% from biosimilars but the share loss should be manageable. In the long run, Amgen stands to benefit from market conversion as one of the few leaders in biosimilar with 10 products under development. The firm maintains its Buy rating on the growth potential from Repatha and biosimilar portfolio.