We continue to see the company's broad portfolio and newer drugs as providing a wide economic moat and a buffer to biosimilar threats to the older Enbrel and Neulasta franchises.
By Karen Andersen, CFA | 03-17-17 | 01:00 PM | Email Article

 Amgen  has released details surrounding the cardiovascular outcomes study for cholesterol-lowering drug Repatha, and we don’t expect to make any significant changes to our fair value estimate. The shares were down on the data, as the risk reduction on the primary endpoint (15%) was at the low end of expectations, despite still being significant. After diving deeper into the data, we think it will be sufficient to change treatment guidelines, and our assumptions for net U.S. prices--going from roughly $10,000 today to $8,000 annually over the next couple of years as payers loosen restrictions--still hold. We continue to see Amgen’s broad portfolio and newer drugs--including approved drugs Repatha and Kyprolis, novel pipeline therapies, and an industry-leading biosimilar pipeline--as providing a wide economic moat and a buffer to biosimilar threats to the older Enbrel and Neulasta franchises.

Karen Andersen, CFA, is a healthcare strategist for Morningstar.

We think Repatha has $4 billion in peak sales potential, but we don’t model a significant ramp in sales until 2018. We think stronger uptake will follow guideline and prescribing label changes (which should push payers to open access), as well as new risk-sharing contracts with payers (which will likely imply a lower net price). Our pricing estimates for Repatha fit well with the value assessment of the drug and the potential impact of risk-sharing contracts. Amgen estimates the value of Repatha at $7,700-$15,000 per year depending a patient’s risk level, and based on data presented at the meeting, Repatha net prices today appear to already be below $10,000. Following this data, Amgen hopes that payers will expand access and reduce the hurdles that have been preventing the majority of patients with prescriptions from initiating therapy, and it plans to offer an option that would provide a refund if a patient has a stroke or heart attack while taking Repatha (this is only expected to lower net pricing if the drug does not perform as it has in clinical trials).

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Karen Andersen, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
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