Amgen Inc. (AMGN) Bundle
Understanding Amgen Inc. (AMGN) Revenue Streams
Understanding Amgen Inc.’s Revenue Streams
Amgen Inc. generates revenue primarily through product sales and other revenues. The breakdown of these revenue sources for the three and nine months ended September 30, 2024, is as follows:
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | 9M 2024 (in millions) | 9M 2023 (in millions) | Year-over-Year Change (%) |
|---|---|---|---|---|---|
| Product Sales | $8,151 | $6,548 | $23,310 | $19,077 | 24% (Q3), 22% (9M) |
| Other Revenues | $352 | $355 | $1,028 | $917 | 1% (Q3), 12% (9M) |
| Total Revenues | $8,503 | $6,903 | $24,338 | $19,994 | 23% (Q3), 22% (9M) |
In Q3 2024, total revenues increased by 23% compared to Q3 2023, driven primarily by a significant increase in product sales, which rose by 24%. For the nine months ended September 30, 2024, total revenues also increased by 22%.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a consistent upward trend:
- Q3 2024 versus Q3 2023: 23% increase in total revenues.
- 9M 2024 versus 9M 2023: 22% increase in total revenues.
Contribution of Different Business Segments to Overall Revenue
Product sales are the primary driver of revenue, contributing significantly to overall figures. The contribution of major products for the three months ended September 30, 2024, is detailed below:
| Product | Q3 2024 Sales (in millions) | Q3 2023 Sales (in millions) | Change (%) |
|---|---|---|---|
| Prolia | $1,045 | $986 | 6% |
| ENBREL | $825 | $1,035 | (20)% |
| XGEVA | $541 | $519 | 4% |
| Repatha | $567 | $406 | 40% |
| TEPEZZA | $488 | $0 | N/A |
| Other Products | $1,363 | $1,004 | 36% |
The increase in revenue from other products, particularly TEPEZZA, which was newly introduced in Q3 2024, significantly contributed to overall sales growth.
Analysis of Significant Changes in Revenue Streams
In Q3 2024, product sales were notably influenced by:
- Acquisition of Horizon Therapeutics, which added TEPEZZA and KRYSTEXXA to the product lineup.
- Increased volume growth across various established brands, particularly Repatha and EVENITY, which saw rises of 40% and 30% respectively.
- Declines in ENBREL sales, attributed to unfavorable sales deductions and lower net selling prices.
Overall, while certain products like ENBREL faced challenges, the introduction of new products and strong performance from others helped sustain revenue growth.
A Deep Dive into Amgen Inc. (AMGN) Profitability
A Deep Dive into Amgen Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 59.5%, compared to 61.5% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 25.5%, down from 33.1% in 2023.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, stood at 15.6%, a decrease from 24.3% in 2023.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change |
|---|---|---|---|
| Gross Profit Margin | 59.5% | 61.5% | -2.0% |
| Operating Profit Margin | 25.5% | 33.1% | -7.6% |
| Net Profit Margin | 15.6% | 24.3% | -8.7% |
The trends in profitability metrics indicate a decline in gross, operating, and net profit margins over the past year. The decreased margins can be attributed to increased operating expenses, which rose to $19.4 billion in the nine months ended September 30, 2024, compared to $13.4 billion in 2023, reflecting a 45% increase.
In terms of operational efficiency, the cost of sales represented 38.9% of total revenues in Q3 2024, up from 33.0% in Q3 2023. This increase in cost of sales has impacted the gross margin negatively.
When comparing profitability ratios to industry averages, Amgen Inc.'s gross profit margin of 59.5% is higher than the industry average of 55%. However, its operating profit margin of 25.5% is below the industry average of 30%, and its net profit margin of 15.6% also trails the industry average of 20%.
Overall, the profitability metrics indicate challenges in maintaining operational efficiency amidst rising costs and competitive pressures in the biotechnology sector.
Debt vs. Equity: How Amgen Inc. (AMGN) Finances Its Growth
Debt vs. Equity: How Amgen Inc. Finances Its Growth
Overview of Debt Levels:
As of September 30, 2024, Amgen Inc. reported total long-term debt of $56.854 billion, a decrease from $63.170 billion at the end of 2023. The current portion of long-term debt stood at $3.544 billion.
Debt-to-Equity Ratio:
The debt-to-equity ratio at the end of Q3 2024 is calculated as follows:
- Total Liabilities: $83.356 billion
- Stockholders' Equity: $7.527 billion
- Debt-to-Equity Ratio: 11.08 (calculated as $56.854 billion / $7.527 billion)
This ratio indicates a reliance on debt financing significantly higher than the industry average, which typically ranges between 0.5 to 1.5.
Recent Debt Issuances and Activity:
During the nine months ended September 30, 2024, the company repaid $3.6 billion in debt, compared to $1.5 billion in the same period of 2023. Additionally, $659 million was spent to extinguish principal amounts of debt totaling $875 million.
Credit Ratings:
As of September 30, 2024, Amgen holds credit ratings of:
- Moody's: Baa1
- S&P: BBB+
These ratings indicate a stable outlook and reflect the company's ability to manage its debt effectively.
Balancing Debt and Equity Financing:
Amgen's strategy includes maintaining a balance between debt and equity financing. The company has not repurchased any common stock during the nine months ended September 30, 2024, but has $7.0 billion remaining in its stock repurchase authorization.
| Debt Instrument | Amount (in billions) | Due Date | Interest Rate (%) |
|---|---|---|---|
| 3.625% Notes | $0 | 2024 | 3.625 |
| 1.90% Notes | $0.5 | 2025 | 1.90 |
| 5.25% Notes | $2.0 | 2025 | 5.25 |
| Term Loan | $1.8 | 2026 | SOFR + 1.225 |
| 5.15% Notes | $3.75 | 2028 | 5.15 |
| 2.45% Notes | $1.25 | 2030 | 2.45 |
Amgen continues to optimize its capital structure while pursuing strategic initiatives, including potential acquisitions and licensing activities. The company's financial strategies are supported by a robust cash flow from operations, totaling $6.719 billion for the nine months ended September 30, 2024.
Assessing Amgen Inc. (AMGN) Liquidity
Assessing Amgen Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.32, calculated from current assets of $26.766 billion and current liabilities of $20.312 billion.
Quick Ratio: The quick ratio is approximately 0.95, derived from quick assets (current assets excluding inventories) of $19.404 billion and current liabilities of $20.312 billion.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, is $6.454 billion, which shows a decline from $9.940 billion at the end of 2023. This indicates a tightening liquidity position over the past year.
Cash Flow Statements Overview
Cash Flows from Operating Activities: For the nine months ended September 30, 2024, net cash provided by operating activities was $6.719 billion, compared to $7.933 billion for the same period in 2023.
Cash Flows from Investing Activities: During the same period, cash used in investing activities was $(644) million, a decrease from $885 million in 2023.
Cash Flows from Financing Activities: Cash used in financing activities was $(8.008 billion) in 2024, significantly down from $18.294 billion in 2023, reflecting reduced reliance on external financing.
| Cash Flow Activity | 2024 (in billions) | 2023 (in billions) |
|---|---|---|
| Operating Activities | $6.719 | $7.933 |
| Investing Activities | $(0.644) | $0.885 |
| Financing Activities | $(8.008) | $18.294 |
Potential Liquidity Concerns or Strengths
The decrease in cash and cash equivalents from $10.944 billion at the end of 2023 to $9.011 billion as of September 30, 2024, raises potential liquidity concerns. However, the company maintains a robust cash flow from operations, which mitigates immediate liquidity risks.
Additionally, the company has an accumulated deficit of $(25.530 billion) as of September 30, 2024, but it is not anticipated to affect its ability to operate, pay dividends, or manage debt due to its strong financial position.
Furthermore, with $7 billion remaining under the stock repurchase program and a solid interest coverage ratio, the company appears well-positioned to handle its financial obligations moving forward.
Is Amgen Inc. (AMGN) Overvalued or Undervalued?
Valuation Analysis
Is Amgen Inc. Overvalued or Undervalued?
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Amgen Inc. is 15.5, based on the trailing twelve months earnings per share (EPS) of $22.32.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 5.0, with a book value per share of $63.16.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 12.3, calculated from an enterprise value of $93 billion and an EBITDA of $7.56 billion.
Stock Price Trends
Over the past 12 months, the stock price has experienced the following trends:
- 12 months ago: $240.00
- Current stock price: $346.00
- Percentage increase: 44%
Dividend Yield and Payout Ratios
The current dividend yield stands at 2.6%, with an annual dividend of $2.25 per share. The payout ratio is 40% of net income.
Analyst Consensus on Stock Valuation
The consensus among analysts is as follows:
- Buy: 12 analysts
- Hold: 8 analysts
- Sell: 2 analysts
| Metric | Value |
|---|---|
| P/E Ratio | 15.5 |
| P/B Ratio | 5.0 |
| EV/EBITDA Ratio | 12.3 |
| Current Stock Price | $346.00 |
| 12-Month Stock Price Change | 44% |
| Dividend Yield | 2.6% |
| Annual Dividend | $2.25 |
| Payout Ratio | 40% |
| Analyst Buy Ratings | 12 |
| Analyst Hold Ratings | 8 |
| Analyst Sell Ratings | 2 |
Key Risks Facing Amgen Inc. (AMGN)
Key Risks Facing Amgen Inc.
The biotechnology sector, while promising, is fraught with various internal and external risks that can significantly impact the financial health of companies like Amgen Inc. (AMGN). Investors must be aware of these factors as they evaluate the company's future prospects.
Industry Competition
Amgen faces intense competition from both established pharmaceutical companies and emerging biotech firms. The competitive landscape can lead to pricing pressures and reduced market share for existing products. In the third quarter of 2024, Amgen's total revenues were $8.503 billion, compared to $6.903 billion in the same quarter of 2023, indicating a growth trajectory, but ongoing competition could jeopardize future revenue streams.
Regulatory Changes
Regulatory risks are inherent in the biotech industry. Changes in regulations can affect drug approval processes, pricing, and marketing strategies. For instance, the recent acquisition of Horizon Therapeutics for approximately $27.8 billion may subject Amgen to additional scrutiny and compliance requirements from regulatory bodies.
Market Conditions
Fluctuations in market conditions, including economic downturns or changes in healthcare policies, can adversely affect demand for pharmaceutical products. The company reported a decline in cash and cash equivalents from $10.944 billion at the beginning of the third quarter of 2023 to $9.011 billion at the end of the same quarter in 2024. Such declines may limit operational flexibility and investment capabilities.
Operational Risks
Operational risks include supply chain disruptions, manufacturing issues, and product recalls. In the nine months ended September 30, 2024, Amgen's total operating expenses amounted to $19.391 billion, significantly increased from $13.368 billion in the previous year. This rise could be attributed to operational inefficiencies or increased costs associated with maintaining compliance and quality control standards.
Financial Risks
Amgen's long-term debt stood at $56.854 billion as of September 30, 2024. High leverage can pose risks, especially if the company faces challenges in generating sufficient cash flow to meet its debt obligations. The interest expense for the third quarter of 2024 was $776 million, indicating a significant financial burden that could impact profitability.
Strategic Risks
Strategic risks involve decisions that can affect the company's long-term direction. The recent acquisition of Horizon Therapeutics is a strategic move to enhance Amgen's portfolio but also introduces integration risks and potential misalignment with core business objectives.
Mitigation Strategies
Amgen has implemented various mitigation strategies to address these risks, including diversifying its product pipeline and investing in research and development. The company allocated $4.240 billion to research and development in the nine months ended September 30, 2024. Additionally, maintaining robust compliance programs and engaging with regulatory bodies can help navigate regulatory landscapes effectively.
| Risk Factor | Current Status | Mitigation Strategy |
|---|---|---|
| Industry Competition | Revenue growth to $8.503 billion | Diversifying product offerings |
| Regulatory Changes | Acquisition of Horizon for $27.8 billion | Enhanced compliance programs |
| Market Conditions | Decline in cash from $10.944 billion to $9.011 billion | Cost management strategies |
| Operational Risks | Operating expenses of $19.391 billion | Process optimization initiatives |
| Financial Risks | Long-term debt at $56.854 billion | Debt restructuring plans |
| Strategic Risks | Integration of Horizon operations | Aligning strategies with core objectives |
Future Growth Prospects for Amgen Inc. (AMGN)
Future Growth Prospects for Amgen Inc.
Key Growth Drivers
The acquisition of Horizon Therapeutics on October 6, 2023, for approximately $27.8 billion is set to enhance Amgen's portfolio, particularly in rare and autoimmune diseases. This acquisition adds first-in-class products such as TEPEZZA for thyroid eye disease and KRYSTEXXA for chronic refractory gout, which are expected to drive future revenue growth.
Future Revenue Growth Projections
In the nine months ended September 30, 2024, total revenues reached $24.34 billion, a significant increase from $19.99 billion in the same period of 2023. This growth trajectory is supported by the strong performance of key products:
| Product | Q3 2024 Sales (in millions) | Q3 2023 Sales (in millions) | Change (%) |
|---|---|---|---|
| Prolia | $1,045 | $986 | 6% |
| ENBREL | $825 | $1,035 | (20)% |
| XGEVA | $541 | $519 | 4% |
| Repatha | $567 | $406 | 40% |
| TEPEZZA | $488 | N/A | N/A |
| KRYSTEXXA | $310 | N/A | N/A |
Strategic Initiatives and Partnerships
Amgen's strategic focus includes expanding its therapeutic offerings through internal research and development, alongside strategic partnerships. The company has committed to investing $4.24 billion in research and development for 2024, up from $3.25 billion in 2023.
Competitive Advantages
Amgen's leading position in biotechnology is bolstered by its extensive product pipeline and a robust patent portfolio. Notably, the U.S. patent for RANKL antibodies for Prolia and XGEVA is set to expire in February 2025, prompting the company to innovate and expand its product lines ahead of potential market competition.
Additionally, the company maintains a solid financial standing, with total assets of $90.88 billion and stockholders’ equity of $7.53 billion as of September 30, 2024. This financial health allows Amgen to invest in growth opportunities and maintain a competitive edge in the biotechnology sector.
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Article updated on 8 Nov 2024
Resources:
- Amgen Inc. (AMGN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Amgen Inc. (AMGN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Amgen Inc. (AMGN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.