By Jacob Sonenshine

All of a sudden, Amgen stock is up 15% since late December to around $299. The next stop for the pharma's shares could be above $340 -- if all goes well this year.

At first, the stock's gains seemed like an innocent rally, driven by a flow of money into the stable healthcare sector. Investors wanted to allocate some capital to safer companies while President Donald Trump's tariff announcements and the competitive AI threat from DeepSeek roiled stocks in the technology, auto, and consumer industries.

But this week, the stock jumped again after Amgen issued a strong financial update Tuesday. Its rise helped push up the S&P 500 healthcare sector up just over 7% since hitting a bottom in late December.

The company's December quarter sales of about $9.1 billion beat estimates by a few hundred million dollars. Sales for several existing drugs such as Repatha, Otezla, and Enbrel, came in stronger than analysts had forecast, helping assure stability across businesses. The better-than-expected sales helped drive a higher profit margin than anticipated, resulting in earnings per share of $5.31, easily topping estimates for $5.10.

More important, the company reaffirmed on its earnings call that it expects additional sales from several newer drugs. The game changer could be Maritide, its weight-loss injection, which the market hopes the Food and Drug Administration will approve soon. The treatment's Phase 1 trial result showed that it helps patients lose weight. While it isn't quite as effective as Eli Lilly's Zepbound, it helps folks maintain their weight loss and is only taken once monthly -- making it a promising product for some GLP-1 patients who might want to eventually switch from Lilly's or Novo Nordisk's products. Amgen is on track to show Phase 2 results as early as June.

Those results, if they support the case for the drug, would likely spark more stock gains. In this scenario, the market would be more convinced that approval -- and a viable use case for patients -- is a legitimate bet.

Amgen stock remains below its record close of $337 hit in September. Since then, the market has questioned Maritide's sales potential. Now, though, investors seem to be getting ready to warm up to the drug's outlook, and when they do, the stock has more room to rise.

"Amgen fundamentals are fine and we look to second half [2025] when we get Phase 2 MariTide obesity data...which could be the key differentiation we're looking for," writes Jefferies analyst Michael Lee, who rates the stock a Buy and has a $350 price target, reflecting 17% upside.

The thesis starts with estimates that patients' spending on obesity treatments could reach over $100 billion less than a decade from now. Today, analysts expect Lilly and Novo to combine for roughly $50 billion of obesity drug revenue by 2030, according to FactSet. That leaves another $50 billion of sales -- or more -- for the likes of Amgen, Gilead Sciences, and Merck -- all of which are entering the obesity market. It's difficult to determine how much market share Amgen could take.

For argument's sake, though, let's say Amgen grabs $5 billion of that pie, up from current 2030 estimates for $2.9 billion in Maritide sales. That would add 5% additional revenue to the current 2030 consensus estimate of $38.7 billion in total sales. As is always the case with biotech and pharma, that total revenue estimate should rise even further if the company's coming updates lead analysts to see a greater probability of Maritide approval and strong demand upon the company's coming updates.

If weight-loss drugs' sales forecasts do rise, the market would probably assume that Amgen's earnings per share estimates for 2030 could rise even more than 5%. Once Amgen has moved on from its initial bump in spending on research and development for Maritide between now and 2030, the company -- in theory -- wouldn't need to spend and borrow much more money, thus keeping interest expenses relatively steady. The result would be that the net profit margin would rise and EPS forecasts for 2030 could easily increase by double digits in percentage terms.

Recent moments of market optimism about Maritide offer a clue for just how much the drug's outlook could boost the stock: In those periods, Amgen stock traded 16 times the next 12 months' earnings (compared with 14 times currently). Based on that multiple and the current 2025 EPS estimates, any positive updates on Maritide could easily push the shares up to $340. That would represent an 11% gain from here.

Amgen investors might have to wait a few months for the stock's next big move, but one could easily be on the way.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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February 06, 2025 16:17 ET (21:17 GMT)

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