Asset Management, Companies and Industries, Investment Themes November 30, 2023


Amgen is the second largest pure-play biotechnology company in the world according to many rankings. The company has been profitable for many years and has had consistent dividend growth for more than a decade. In the current macroeconomic environment, after study and discussion, we concluded that we were not in favor of owning “high-flying” healthcare start-ups but we did want to own a biotechnology name. Amgen’s broad product portfolio, profitability, good cash flow and generous dividend were attractive and we decided to add the company to our portfolios.

How is a biotechnology company different from a pharmaceutical company? They both make medicines but the products made by biotechnology companies are generally derived from living organisms, often making these drugs quite challenging to manufacture. Medicines made by pharmaceutical companies are generally synthesized from chemicals through a series of steps. Companies described as “biopharmas” use both methods.  Amgen is in the process of significantly expanding its manufacturing capabilities, as management believes that the company’s expertise will position it for a leadership role in global biosimilar manufacturing.

Amgen operates in six commercial areas: inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience. In 2022, Amgen had revenues of $26.3 billion from its portfolio of 27 medicines. Sixteen of Amgen’s products generated record sales and nine had sales of over $1 billion.  The company’s major products include Enbrel, which is used to treat immune-mediated or inflammatory diseases, particularly rheumatoid arthritis; Repatha, used to lower cholesterol through a different mechanism of action than the “statin” drugs, Evenity and Prolia, both used to treat osteoporosis, and Nplate, Blincyto and Kyprolis, all used in cancer or blood diseases.

Amgen also has an active pipeline for new medicines. Last year the company invested over $4 billion in research and development. Three-quarters of the molecules being studied have the potential to be first-in-class treatments for serious diseases which need better therapies.

Amgen has recently been in the financial news after having its acquisition of Horizon Therapeutics approved by the FTC. Amgen will pay $27.8 billion for Horizon, which brings with it Tepezza, used to treat thyroid eye disease and Krystezza for gout. The deal is expected to close in the fourth quarter of 2023 and will expand Amgen’s reach even further in the treatment of inflammatory diseases.

Individual investment positions detailed in this post should not be construed as a recommendation to purchase or sell the security. Past performance is not necessarily a guide to future performance. There are risks involved in investing, including possible loss of principal. This information is provided for informational purposes only and does not constitute a recommendation for any investment strategy, security or product described herein. Employees and/or owners of Nelson Capital Management, LLC may have a position securities mentioned in this post. Please contact us for a complete list of portfolio holdings. For additional information please contact us at 650-322-4000.

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