Amgen Inc · Company Review Thursday

Company Review: Amgen Inc.

The biotechnology industry as a whole is low-key becoming a high growth industry in the  US stock market. Currently, service IT providing companies like Google and electronics producing companies like Apple get a significant amount of attention from technology sector analysts, but I really think biotechnology will boom over the next 5 to 7 years. One of the companies that I currently invest in that I really forsee taking off is Amgen Inc. Let’s take a closer look at why I think it’s currently a great buy.

Company Snapshot (Yahoo! Finance Data)
Name:  Amgen, Inc (as of close of business 2/4/2016)
Ticker: AMGN
Current Price: $150.30
52 Week High Price:$130.09
52 Week Low Price: $181.81
Market Capitalization: $113.32B (Large Capital)
Price/Earnings (P/E Ratio): 16.59
Earnings/Share (EPS): $9.06
Dividend: $4.00/year (2.62% yield)
Industry: Biotechnology
Primary Business: Human Therapeutics

The Good

In the biotechnology industry, the bigger the company, the more likely they are to succeed. There is truly strength in numbers as far a research and development is concerned in the biotechnology world. The more eyes you have searching for the next improvement to the equipment used in hospitals to perform major surgeries or the best molecules to use in a compound designed to reverse auto-immune diseases, the better chance you have of getting an idea patented, FDA approved and produced on a large scale for profit. Amgen is currently ranked just below Gilead Sciences as the largest biotechnology company in the world. If they continue to grow at the rate they have grown over the next couple years, they could potentially unseat the longstanding leader, Gilead.

As I have mentioned in a previous post, intangible assets like patents, copyrights, trademarks and such are very valuable to a company that is heavily invested in research and development. As of December 2014, Amgen had a gross amount of $18.625 billion dollars worth of intangible assets, which is higher than Gilead Sciences which only had $11.863 billion in gross intangible assets on its balance sheet. I am definitely looking forward to see the numbers in this category for 2015, just to see if Amgen has kept pace with accumulating intellectual property.

The Bad

One of my other favorite metrics to watch for a company is its total debt to capital percentage. This helps understand how the company’s operations are funded, whether through debt or through shareholder’s equity. Amgen currently has a 52.9% debt-to-capital percentage which means more than half of its operations are financed through loans or debt. I personally don’t like the fact that they have so much funded through debt, but it is working for them. They are using the money they get through financing activities well by making products that are producing good revenue. As much as I don’t like debt for myself, I definitely don’t like it from companies, but such is life. In the way I got my student loan for grad school, Amgen got their loans for researching new products. Both investments have potential for high upside.

The Ugly

I think I should also note here that other companies that compete with Amgen like Biogen, Gilead Sciences and Celgene also have similar financing structures. Seems that the higher debt comes with the territory for being the first movers in the biotechnology space. With FDA approvals so hard to come by and a dire need to protect intellectual property, the biotechnology sector is fierce for competition. So like Bubba Sparxxx says…ugly

But it’s only ugly so that we either as consumers or investors can benefit with better treatment options and higher profits respectively.

Until next post folks..

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s