Investing.com -- Fitch Ratings has revised its outlook for biopharmaceutical company Amgen Inc (NASDAQ:AMGN). to positive from stable, indicating a potential future upgrade. The ratings agency has also affirmed the company’s Long-Term Issuer Default Rating (IDR) at ’BBB’, Short-Term IDR at ’F2’, and all senior unsecured debt at ’BBB’.
The revised outlook is based on Fitch’s belief that Amgen will continue to reduce its debt and increase revenues from new products, which will lower the EBITDA leverage below 3.25x and boost the CFO-capex/debt ratio above 15% over the next 12-24 months. Fitch anticipates that Amgen will maintain these levels in the medium to long term. The successful launch of the obesity drug Maritide and a favorable resolution of ongoing tax litigation could influence a potential upgrade.
In 2024, Amgen experienced a 19% year-on-year increase in product sales, driven by its diverse portfolio of first-in-class medicines and ten products achieving double-digit growth. The company is expected to continue its top-line growth, fueled by Horizon therapies, established products and biosimilars.
Amgen is also on track to meet its debt reduction goal by repaying over $10 billion of debt by the end of 2025. This, combined with EBITDA growth from sales, positions Amgen to meet or exceed Fitch’s positive rating sensitivity by year-end 2025, despite suspending share repurchases.
Amgen’s innovative R&D pipeline is promising, with recent approvals for IMDELLTRA™ and BLINCYTO®, and positive clinical data for TEZSPIRE® and UPLIZNA®. The pipeline features potentially first-in-class medicines across various therapeutic categories. MariTide is expected to generate substantial revenue by 2030, capitalizing on the growing obesity market.
Despite competitive pressures, Fitch expects Amgen to maintain stable margins through the forecast period. Growth in exclusive products and new revenue sources should enhance the sales mix. Effective cost control will support strong operating leverage, with increasing free cash flow driven by sales growth, albeit offset by rising dividends.
Amgen is currently contesting IRS adjustments to its taxable income for 2010-2015, related to profit allocation between the U.S. and Puerto Rico. The IRS seeks additional taxes totaling approximately $8.7 billion plus interest and penalties. Amgen has filed petitions in the U.S. Tax Court and anticipates a decision in 2026.
Amgen faces biosimilar or generic competition for several products, which collectively represent less than 5% of total revenues. Patents for RANKL antibodies, affecting Prolia and XGEVA, expired in February 2025 in the U.S. and will expire in November 2025 in select European countries. Sales for Prolia and XGEVA totaled $6,599 million in 2024, equivalent to 19% of sales at risk in 2025.
Amgen is also dealing with revenue and margin pressures due to formulary management affecting drug access and costs. Proposed tariffs on pharmaceuticals, such as a 25% levy on imports, could significantly impact Amgen. These tariffs aim to boost U.S. production but may increase costs, worsen shortages, and elevate prices. Amgen’s reliance on a global supply chain could lead to higher costs for imported ingredients, affecting pricing and profitability strategies.
In comparison to its peers, Amgen has a strong profitability profile with an EBITDA margin of about 50%, surpassing Bayer (OTC:BAYRY), Viatris, AstraZeneca (NASDAQ:AZN), Novartis (SIX:NOVN) and Roche. However, Amgen’s R&D productivity rating of bbb+ on Fitch’s Rating Navigator is lower than AstraZeneca’s a+, Novartis’s aa, and Roche’s aa, indicating a comparatively less robust pipeline.
Fitch’s key assumptions include consolidated revenue increases at a CAGR of 5.5% through FY 2028, adjusted EBITDA margins ranging from 47%-50% over the forecast period, and common dividends increasing at a CAGR of 6.7% over the forecast period. Share repurchases are expected to resume in FY 2026 at $1.0 billion per year over the forecast period.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
