TipRanks Smart Value #62: Biotech Bargain

Shrilekha Pethe on May 12, 2026

Dear Investors,

Welcome to the 62^nd edition of the TipRanks Smart Value Newsletter.

This Week’s Top Value Pick: Amgen (AMGN)

Amgen (AMGN) is a U.S.-based biotechnology company that focuses on developing and manufacturing innovative therapies for serious illnesses across various areas, including oncology, cardiovascular disease, inflammation, bone health, and rare diseases. The company markets a broad portfolio of biologic medicines and biosimilars, supported by strong research and development capabilities, a global commercial presence, and a growing focus on expanding its pipeline through innovation and acquisitions.

Gene Giant

Amgen traces its origins to 1980, when the company was founded as Applied Molecular Genetics during the early emergence of the biotechnology industry. The company initially focused on recombinant DNA technology to develop biologic therapies, positioning itself at the forefront of biotech innovation. A major turning point came in the late 1980s and early 1990s with the launches of Epogen and Neupogen. These two breakthrough therapies became blockbuster products and established Amgen as one of the first highly profitable biotechnology companies. The strong cash flows generated by these drugs funded large-scale investments in research, manufacturing infrastructure, and global commercialization capabilities.

Through the 1990s and 2000s, Amgen broadened its portfolio beyond supportive cancer care and nephrology through internal development and acquisitions. The 2001 acquisition of Immunex significantly expanded the company’s inflammation franchise through Enbrel, which became one of the world’s top-selling biologic drugs and a major long-term earnings driver. Amgen later strengthened its oncology and bone health businesses with several leading therapies, helping diversify revenue streams across cancer care and chronic disease treatment categories.

During the 2010s and early 2020s, Amgen increasingly relied on targeted acquisitions and pipeline expansion to offset maturing legacy products and drive long-term growth. In 2019, the company acquired Otezla from Bristol Myers Squibb as part of regulatory remedies tied to Bristol Myers’ acquisition of Celgene. The deal added a fast-growing psoriasis treatment that became a key asset within Amgen’s inflammation portfolio. In 2021, Amgen acquired Five Prime Therapeutics, gaining bemarituzumab, a late-stage gastric cancer therapy, while the acquisition of Teneobio expanded the company’s bispecific and multispecific antibody technologies, complementing its BiTE platform. That same year, the company also acquired Rodeo Therapeutics to strengthen its regenerative medicine capabilities.

Amgen further expanded into rare diseases and immune-related disorders via its 2022 acquisition of ChemoCentryx, adding a treatment for a rare autoimmune disease and strengthening its presence in specialized, high-value therapies. Its largest acquisition came in 2023 with the $27.8 billion purchase of Horizon Therapeutics, surpassing the size of the Immunex deal. The acquisition added several rapidly growing rare disease treatments, significantly expanding Amgen’s presence in high-value specialty medicines and strengthening its long-term earnings potential. Although the FTC initially challenged the transaction on antitrust grounds, the dispute was resolved and the deal closed.

Amgen’s evolution reflects a consistent strategy centered on biologic innovation, targeted acquisitions, manufacturing scale, and portfolio diversification, transforming the company into one of the world’s largest biotechnology firms with durable cash flows and expanding earnings power.

Biologic Fortress

Amgen operates a biotechnology business model centered on discovering, developing, manufacturing, and commercializing biologic medicines for chronic and serious diseases. The company generates most of its revenue through global sales of branded therapies across oncology, inflammation, cardiovascular disease, bone health, and rare diseases, supported by a combination of internally developed drugs, acquired products, and biosimilars.

A key feature of Amgen’s model is its focus on biologic medicines, which are typically more complex to manufacture than traditional small-molecule drugs and often face lower levels of generic competition. This creates longer product lifecycles, stronger pricing power, and high barriers to entry, supporting durable cash flows. Several of Amgen’s largest products, including Repatha, Prolia, Xgeva, Otezla, Tepezza, and Krystexxa, address chronic conditions requiring ongoing treatment, generating recurring revenue streams and high patient retention.

The company also benefits from significant manufacturing scale and vertical integration. Amgen operates large-scale biologics manufacturing facilities around the world, allowing it to produce complex therapies efficiently while supporting high operating margins and free cash flow generation. Its established commercial infrastructure and relationships with healthcare providers, payers, and hospital systems further strengthen market access and product adoption.

Another important earnings driver is portfolio diversification. Amgen generates revenue across multiple therapeutic categories and geographic markets, reducing dependence on any single product. The company has also expanded its biosimilars business, creating additional revenue opportunities through lower-cost alternatives to major biologic drugs.

Looking ahead, continued earnings growth is supported by newer growth products and recent acquisitions. Rare disease therapies acquired through Horizon Therapeutics, including Tepezza, Krystexxa, and Uplizna, are growing rapidly and address markets with limited competition and premium pricing. Newer oncology and inflammation drugs such as Blincyto, Tezspire, Evenity, and Imdelltra are also contributing to growth, while pipeline candidates including MariTide could open large long-term market opportunities.

Combined with Amgen’s strong balance sheet, manufacturing expertise, and consistent investment in research and development, these factors support durable earnings growth and strong free cash flow generation over time.

Pipeline Revolution

Amgen’s long-term investment outlook increasingly depends on whether its next generation of medicines can offset slowing growth from older products and create new blockbuster revenue streams. The company is focusing heavily on obesity, cardiovascular disease, cancer, autoimmune disorders, and AI-driven drug development, areas that represent some of the largest and fastest-growing opportunities in healthcare.

The biggest opportunity is arguably MariTide, Amgen’s experimental obesity and diabetes drug designed to compete with leading weight-loss medicines from Novo Nordisk and Eli Lilly and Company. However, Amgen is trying to differentiate MariTide through convenience and tolerability rather than simply matching weight-loss results. Current obesity drugs typically require weekly injections, while MariTide is being developed for monthly dosing or potentially every 8 to 12 weeks over time. If successful, this could become a major competitive advantage because many patients struggle to remain on long-term therapy due to frequent injections and side effects.

Management believes MariTide’s newer three-step dose escalation process may reduce gastrointestinal side effects such as nausea and vomiting, which are among the main reasons patients discontinue obesity drugs. Importantly, management noted that when side effects do occur, they generally last only a few days rather than becoming persistent problems. This could be very significant, as long-term adherence is one of the most important commercial factors in obesity medicine. A drug patients can comfortably stay on for years could generate enormous recurring revenue.

Amgen has launched multiple late-stage studies to strengthen MariTide’s long-term positioning, including trials evaluating whether patients can maintain weight loss with injections every 8 weeks or 12 weeks after the initial treatment. The company launched a SWITCH study designed to show that patients can transition from weekly injections of semaglutide or tirzepatide to MariTide’s less frequent dosing schedule. This is strategically important because millions of patients may already be using competing therapies by the time MariTide launches commercially. If Amgen can attract dissatisfied users seeking greater convenience or fewer side effects, the drug could still capture meaningful market share in an already crowded industry.

Another potentially important growth driver is olpasiran, a cardiovascular drug targeting lipoprotein(a), or Lp(a), which is a genetically inherited risk factor linked to heart attacks and strokes. Most current cholesterol drugs do not significantly lower Lp(a), leaving a large unmet medical need. Olpasiran uses siRNA technology to essentially shut down the body’s production of Lp(a), and studies so far have shown reductions greater than 95%, which is highly significant scientifically. The drug may also require only quarterly dosing, potentially improving convenience and adherence.

The company is currently conducting a Phase III OCEAN(a) study to prove that lowering Lp(a) actually reduces heart attacks, strokes, and cardiovascular deaths. The success of this study could position olpasiran as a potential blockbuster in a new cardiovascular treatment category.

Amgen is also trying to expand existing drugs to treat additional diseases, thereby increasing long-term revenue potential. Uplizna, which is already approved for a rare autoimmune condition, is now being studied in autoimmune hepatitis and CIDP, a chronic nerve disorder caused by immune-system dysfunction. This strategy is common in biotech because once a drug mechanism has already been proven safe and effective, expanding into related diseases can significantly increase sales without requiring an entirely new drug platform.

Similarly, dazodalibep is being developed for Sjögren’s disease, a chronic autoimmune disorder that causes severe dry eyes, dry mouth, fatigue, and systemic inflammation. There are currently few effective approved treatments specifically for this condition, creating a potentially meaningful market opportunity if Amgen succeeds. Importantly, competing programs from Novartis and Sanofi were discontinued, which could strengthen Amgen’s competitive positioning if its late-stage studies are successful.

Cancer therapies also remain a major strategic focus through Amgen’s BiTE platform, which helps the immune system recognize and attack cancer cells more effectively. Xaluritamig is currently being tested in advanced prostate cancer patients who have exhausted multiple treatment options, but Amgen is now trying to move the drug into earlier stages of treatment. This is important because earlier-stage cancer patients generally respond better to therapy, stay on treatment longer, and represent much larger commercial markets.

The company is pursuing a similar strategy with Imdelltra, also known as tarlatamab, for small-cell lung cancer, one of the deadliest forms of lung cancer. Early survival data has been encouraging, and Amgen is now studying the drug in earlier treatment settings, including maintenance therapy after chemotherapy. This matters because oncology drugs typically become significantly more valuable when they move from last-line treatment into broader frontline or maintenance use where patient populations are much larger.

At the same time, Amgen has shown willingness to discontinue weaker programs when commercial potential appears less attractive. The company recently ended development of AMG 193 after a strategic review. This allows management to redirect resources toward higher-potential opportunities in obesity, cardiovascular disease, oncology, and immunology.

AI Advantage

Beyond individual drugs, Amgen is increasingly integrating artificial intelligence across research, clinical trials, manufacturing, and regulatory operations. With this initiative, the company aims to lower development costs, improve productivity, speed up drug launches, and increase success rates. Management stated that AI has accelerated antibody-drug optimization by roughly 50%, potentially allowing researchers to identify promising medicines much faster than traditional methods.

AI is also improving clinical trial efficiency by helping identify the best hospitals and regions for patient enrollment, in some cases improving enrollment rates by up to 3x. Faster enrollment can shorten development timelines and reduce costs. The company is also using generative AI tools to assist with regulatory filings, which could streamline the lengthy approval process for new drugs.

Through deCODE Genetics, its Iceland-based genetics subsidiary, Amgen is using large-scale genetic and biological datasets to identify entirely new disease targets, including previously overlooked regions of human DNA. This expands the pool of potential future medicines and may strengthen the company’s long-term pipeline productivity.

AI is also improving manufacturing efficiency. Amgen stated that automation reduced production line clearance times between biologic drug batches from roughly 30 minutes to just 2 minutes per batch. These improvements can meaningfully increase factory utilization, reduce manufacturing costs, and support margins over time.

The company has also announced plans to invest an additional $300 million to expand its U.S. manufacturing network, with a major focus on increasing biologics production capacity in Puerto Rico. The investment will support next-generation manufacturing technologies, strengthen domestic supply chains, and help ensure reliable medicine availability for patients. The new commitment builds on Amgen’s broader U.S. expansion strategy, including previously announced investments in Puerto Rico, Ohio, California, and North Carolina. Since 2017, the company has invested more than $40 billion into U.S. manufacturing and research operations, reflecting its long-term commitment to domestic biopharmaceutical production and innovation.

Amgen is currently in an ongoing IRS tax dispute related to how profits were allocated between the United States and Puerto Rico, where the company manufactures many products. The IRS argues that too much profit was assigned to Puerto Rico, reducing U.S. tax obligations. Amgen strongly disputes these claims and believes its tax structure complied with existing law.

The first case covering 2010–2015 remains in tax court, with a decision not expected before the second half of 2026. A second dispute covering 2016–2018 emerged after the IRS issued a draft Notice of Proposed Adjustment in April 2026. While management described the claims as “without merit,” however, an unfavorable outcome could potentially result in material back taxes, penalties, and interest expenses.

Still, these disputes are relatively common among large multinational pharmaceutical companies that operate global manufacturing and intellectual-property structures designed to legally optimize taxes. As a result, the litigation is viewed as a manageable long-term financial risk that is unlikely to materially impact Amgen.

Biologic Momentum

Amgen has delivered steady financial growth over the past five years, with revenue and adjusted EPS increasing at a CAGR of 7.5% and 6.9%, respectively. Growth has been driven by rising demand for newer medicines, expanding biologics and biosimilars franchises, and the transformative acquisition of Horizon Therapeutics, which significantly strengthened the company’s rare disease portfolio.

The company continued this momentum in the first quarter of 2026. Total revenues increased 6% year-over-year to $8.6 billion, beating Street estimates. Product sales increased 4% year-over-year, while Amgen’s six key growth drivers collectively generated around 70% of total sales and grew 24%. The business is increasingly shifting toward newer, faster-growing medicines, helping offset pressure from older therapies facing biosimilar competition. Notably, 16 products delivered double-digit or better sales growth, while 17 medicines are now generating annualized sales exceeding $1 billion.

Adjusted EPS rose 5% to $5.15, supported by higher revenues despite increased operating expenses tied to pipeline expansion, and above Street expectations. Operational profitability remained strong, with adjusted operating margins holding at 45% even as R&D spending increased 16% to support development programs across obesity, oncology, and rare diseases.

Growth was driven by several key franchises. In general medicine, Repatha revenue increased 34% year-over-year to $876 million, supported by expanded cardiovascular prevention guidelines and strong prescription growth. Evenity rose 27% to $562 million, benefiting from growing adoption in osteoporosis treatment and a still largely underpenetrated patient population.

Rare disease therapies remained a major growth engine, with segment revenue increasing 25% to $1.2 billion. Uplizna nearly tripled year-over-year, while Tepezza grew 29% as patient adoption continued expanding. In innovative oncology, revenue increased 25% to $1.8 billion, led by Imdelltra’s rapid adoption in second-line small cell lung cancer and continued growth from Blincyto.

Meanwhile, Amgen’s biosimilars business continued gaining scale, with revenue increasing 14% to $835 million. Pavblu, the company’s biosimilar version of Eylea, showed particularly strong adoption among retina specialists, reinforcing biosimilars as an increasingly meaningful contributor to long-term growth.

Amgen continued to generate strong cash flow in the first quarter of 2026, with free cash flow rising to $1.5 billion from $1 billion a year earlier. The improvement was supported by the company’s high-margin biologics portfolio, growing contribution from newer medicines, and large-scale manufacturing capabilities. At the same time, capital expenditures increased to $700 million as Amgen expanded manufacturing capacity to support future growth areas, particularly obesity therapies, while maintaining its full-year capital spending target of approximately $2.6 billion.

The company also raised its FY26 guidance, now expecting revenue of $37.8 billion and adjusted EPS of $22.4, both at midpoint, while projecting adjusted operating margins of roughly 45% to 46% of product sales.

Hidden Growth

Shares of AMGN have risen by risen by around 20% over the past year, driven largely by investor enthusiasm around MariTide. Amgen has increasingly traded like an obesity-drug story layered on top of a solid but patent-pressured base business, making MariTide data the primary source of price fluctuations. Investor sentiment swung sharply as the company released obesity-drug trial results, with weaker-than-expected early weight-loss data and concerns around gastrointestinal side effects initially pressuring shares before later Phase II results showing strong sustained weight loss, improved tolerability, and broader Phase III expansion helped the stock recover through 2025.

At the same time, Amgen’s core business remained an important source of stability, supported by continued growth from products such as Repatha, Imdelltra, and Uplizna, alongside rising biosimilar sales. Growth from newer products is helping diversify revenue streams and reduce dependence on aging legacy medicines facing future patent expirations.

Currently, AMGN is trading slightly above its historical averages based on non-GAAP trailing and forward P/E ratios, while trading near to slightly below historical averages based on forward EV/EBITDA and forward price-to-cash-flow ratios.

Compared to its peers including Novo Nordisk, AbbVie, Regeneron, Eli Lilly, and Vertex, AMGN trades in the low-to-moderate valuation range based on non-GAAP trailing and forward P/E ratios and forward price-to-cash flow ratios. Amgen also appears relatively inexpensive on an enterprise-value basis. Its forward EV/EBITDA ratio of 10.3x is below peers such as AbbVie, Eli Lilly, and Vertex, suggesting the market is assigning a more conservative valuation to the company despite its scale and profitability. This suggests that the market may still be underestimating the potential upside from newer growth drivers such as MariTide, Olpasiran, and Amgen’s expanding oncology and rare disease portfolio, and continues to view Amgen as a slower-growth but highly profitable and cash-generative biotechnology company.

Analysts remain optimistic about AMGN as the company continues to benefit from strong cash generation and high operating margins, allowing the company to consistently fund R&D, manufacturing expansion, and strategic investments while maintaining financial resilience. At the same time, growth from newer blockbuster products is helping diversify revenue streams, reduce dependence on older medicines, and support more durable long-term sales growth.

The company is also expanding manufacturing capacity and investing in advanced biologics production capabilities, which should improve supply reliability, support future product launches, and strengthen Amgen’s long-term competitive position.

Street consensus implies roughly 10% upside from current share levels, with more bullish forecasts implying an upside of around 31%. The wide dispersion in analyst price targets for AMGN largely reflects differing views on the long-term commercial potential of MariTide and how effectively Amgen can offset upcoming patent expirations. This optimism is reinforced by discounted cash flow analysis, which indicates that AMGN shares may be trading at an estimated 51% discount to intrinsic value, suggesting meaningful valuation support for investors.

Amgen has steadily strengthened its shareholder returns strategy over the past decade. The company has paid uninterrupted dividends since 2011 and has raised its dividend for 15 consecutive years, with annual dividend growth averaging roughly 10% over the last decade. Based on adjusted earnings, Amgen distributes about 44% of profits to shareholders, leaving room to continue investing in R&D, manufacturing, and pipeline expansion.

The company currently offers a dividend yield of around 3%, nearly double the healthcare sector average of 1.6%, making the stock attractive for income-oriented investors. For the most recent quarter, the company declared a dividend of $2.52 per share payable in June 2026. Although Amgen did not repurchase shares during the first quarter, the company still had $6.8 billion remaining under its existing share repurchase authorization as of March 31, 2026. Management also indicated that total share repurchases are expected to remain below $3 billion for FY26.

Investing Takeaway

Amgen stands out as a value-oriented biotechnology investment backed by durable cash flows, a diversified portfolio of biologic medicines, and a growing pipeline of next-generation therapies. While the market remains heavily focused on the long-term potential of MariTide and other pipeline assets, Amgen’s core business continues to generate strong profitability through established products, biosimilars, and rare disease treatments. Unlike many higher-valued biotech peers, the company trades at a more conservative valuation despite its manufacturing scale, strong margins, and consistent free cash flow generation. This creates a favorable risk-reward profile for long-term investors seeking a combination of stability, income, and future growth potential. Continued investment in obesity, oncology, cardiovascular disease, and AI-driven drug development could gradually reshape investor perception and unlock additional valuation upside over time.

Category: Smart Value