From the looks of it, Amgen is having a bang-up week. It won FDA approval for its highly anticipated migraine drug, Aimovig, Thursday, and yesterday it racked up its fifth nod for the bone drug Prolia. Growth-hungry investors have pushed Amgen’s stock up 3% to $176.47 in the past seven days.

But are they too optimistic that Amgen’s pipeline will deliver enough growth to justify the company’s $118 billion valuation? Perhaps, said Leerink analysts in an in-depth report distributed to investors Tuesday. "The most concerning conclusion of this analysis is the lack of opportunity in Amgen’s pipeline," they wrote.

Leerink performed a "sum of the parts" analysis on Amgen, taking into account revenue forecasts for Prolia and for legacy products like Enbrel and Epogen, and then estimating the potential future value of what's in the company's pipeline. Even when they added in emerging products like cholesterol drug Repatha and blockbuster hopeful Aimovig, they couldn’t find significant upside in the company’s value.

Much of Amgen’s challenge lies in its oldest products facing biosimilar competition, current and imminent. Leerink estimates sales of Enbrel, Neupogen, Epogen and their second-generation versions will be cut in half over the next decade as biosimilars take hold.

It doesn’t help that President Donald Trump and his administration have rolled out an aggressive plan to ease the path to market for generic and biosimilar drugmakers. Their initiatives include publicly shaming companies that refuse to give samples of their products to makers of low-cost alternatives. Amgen wasn’t included in the inaugural list of offenders, which the FDA released last week, but Trump and Co.’s focus on increasing use of biosimilars in the U.S. could squash the value of Amgen’s legacy products even more than Leerink is expecting, its analysts warned.

The approval of Aimovig was an important win, to be sure, because it gives Amgen first-in-class status for injectable drugs that work by blocking the CGRP protein, preventing migraine before it starts. But Amgen and its marketing partner, Novartis, have to overcome several hurdles, not the least of which will be persuading payers to shell out for the drug, even at a lower-than-expected price of $6,900 per patient per year for the drug. And fresh competition is expected soon from Eli Lilly.

The mere fact that Amgen is partnered with Novartis on Aimovig represents a broader challenge, Leerink analysts argued. In their report, they listed seven pipeline projects Amgen's working on with other companies, arguing that such "shared economics" dampens the top-line boost from any new approvals. Leerink estimates that total sales of new products will double to $15 billion by the end of 2022, but growth of new product revenues will slow down considerably, from 19% last year to just 8% in 2022.

"We would need to see positive proof of concept and progress to pivotal trials for one or more major (preferably wholly owned) program at Amgen to become more excited about the clinical pipeline. At this time it is not clear that this will occur," Leerink analysts said.

So what’s the solution to Amgen’s growth woes? M&A, of course. A well-thought-out acquisition "should diversify the company’s revenue mix away from the increasingly challenged legacy products and add potentially high value mid-to-late stage pipeline opportunities that could meaningfully alter the company’s revenue trajectory over the 2020-2030 period," Leerink said in its note to investors.

During a conference call with analysts after Amgen’s most recent quarterly earnings report, CEO Bob Bradway was asked several times for hints about the company’s plans for "transformative" deal-making. "Our focus … is on finding opportunities to invest in innovation," Bradway said. Amgen, he added, will "continue to be thoughtful in reviewing all the different opportunities."

As for the new FDA approval of Prolia—to treat glucocorticoid-induced osteoporosis in patients at high risk for bone fractures—it’s unclear just how much it will fuel new revenue. Leerink estimates Prolia sales will hit $4 billion this year, and that growth will inch up a bit each year through 2028, when the product will bring in $6.2 billion. But the analysts point out that their forecast for the product is considerably sunnier than the consensus estimate, which shows Prolia peaking at $4.8 billion in sales before falling back to $3.9 billion in 2028.

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