Amgen Stock Trades Below Historical Valuation Amidst Strong Q2 Results and Robust Pipeline
Amgen (NASDAQ: AMGN) reported robust second-quarter 2025 financial results, with significant increases in revenue and non-GAAP earnings per share. Despite strong fundamentals and a healthy dividend yield, the stock is trading below its historical valuation multiples, presenting a potential 'buy the dip' opportunity for investors. The company's strong pipeline, particularly the highly anticipated weight-loss drug MariTide, and strategic investments underpin its long-term growth prospects, even as it navigates challenges from biosimilar competition and pricing pressures.
Amgen Delivers Strong Q2 2025 Performance, Valuation Remains Discounted
Amgen Inc. (NASDAQ: AMGN) reported robust financial results for the second quarter of 2025, demonstrating significant growth across key metrics. Despite these strong fundamentals and a promising product pipeline, the biotechnology giant’s stock has been trading below its historical valuation multiples, leading some analysts to suggest a potential "buy the dip" opportunity for long-term investors.
Q2 2025 Financial Highlights and Product Performance
For the second quarter of 2025, Amgen recorded total revenues of $9.2 billion, marking a 9% increase year-over-year and surpassing analyst estimates of $8.94 billion. The company's non-GAAP earnings per share (EPS) surged by 21% to $6.02, significantly outperforming the consensus estimate of $5.28. GAAP EPS also saw a substantial increase of 92% to $2.65.
Operating income demonstrated healthy growth, with GAAP operating income rising to $2.7 billion and non-GAAP operating income reaching $4.3 billion. The company generated $1.9 billion in free cash flow during the quarter. In a show of its commitment to shareholder returns, Amgen declared a quarterly dividend of $2.38 per share, a 6% increase from the prior year, representing an annualized dividend of $9.52 and a dividend yield of 3.5%.
Product-wise, several key assets drove growth: sales of Repatha increased by 31% year-over-year, Tezspire saw a 46% increase in sales to $342 million, and EVENITY sales grew by 32%. However, the company is navigating the impact of biosimilar competition, with sales for Prolia and Xgeva anticipated to decline in the second half of 2025 following patent expirations. Prolia sales, for instance, fell 4% year-over-year in Q2 2025. Conversely, Amgen’s biosimilar portfolio generated $735 million in revenue in Q1 2025, a 35% year-over-year increase, boosted by new launches like Wezlana and Pavblu.
Amgen also raised its full-year 2025 revenue guidance to a midpoint of $35.5 billion and its non-GAAP EPS guidance to a midpoint of $20.75, signaling confidence in its future performance.
Market Reaction and Valuation Analysis
Despite the positive financial disclosures, Amgen’s stock has experienced a recent dip, trading at approximately $276 as of mid-September 2025, placing it within the lower half of its 52-week range ($253.30 - $339.17). The stock’s forward Price-to-Earnings (P/E) ratio stands at 13.1, which is notably below its historical P/E average of 14.7, suggesting a potential undervaluation.
Market observers note that investor attention remains significantly focused on the progress of MariTide, Amgen’s experimental weight-loss drug, with ongoing debates surrounding its tolerability. The company also faces persistent challenges from increasing biosimilar competition, pricing pressures, and regulatory changes, which appear to be weighing on investor sentiment.
The stock’s trading volume on the day of its earnings release was 2,156,828 shares, lower than its average volume of 2,770,574 shares. The company’s market capitalization is currently around $147.02 billion.
Broader Context and Implications
Amgen maintains a strong financial position, evidenced by a BBB+ credit rating from S&P and $8.0 billion in cash on hand. The company has actively managed its debt, retiring $1.4 billion in Q2 2025, contributing to a year-to-date total of $4.3 billion. Its net debt to TTM EBITDA ratio stands at a healthy 2.98x.
Over the past decade, Amgen has delivered a 152% total return, outperforming several pharmaceutical peers. The company’s consistent dividend growth, now spanning 13 consecutive years with an 8.5% 5-year Compound Annual Growth Rate (CAGR), underscores its commitment to returning capital to shareholders.
Analyst sentiment is cautiously optimistic, with an average price target ranging from $304.43 to $315.15, suggesting a potential upside of approximately 7.7% to 10.94% from recent trading levels. This aligns with the "buy the dip" thesis, which posits that Amgen represents an attractive entry point for long-term investors given its robust fundamentals and undervalued status.
Looking Ahead: Pipeline and Strategic Outlook
Amgen’s future growth is heavily supported by a robust pipeline of investigational therapies. MariTide (maridebart cafraglutide), the highly anticipated weight-loss drug, is a late-stage asset considered a potential future top performer, with increased research and development (R&D) investments supporting its advancement. Other promising candidates include Bemarituzumab, an investigational stomach cancer medicine that recently completed a Phase 3 study with positive results, and Rocatinlimab, for moderate to severe atopic dermatitis, which showed positive preliminary Phase 3 results in early September 2025.
The company is also making strategic investments, including a $1.5 billion expansion of manufacturing capabilities in North Carolina and leveraging artificial intelligence (AI) and data science to accelerate drug discovery and development. These initiatives are expected to bolster Amgen’s long-term competitive position.
Despite these positive developments, Amgen will continue to navigate the evolving pharmaceutical landscape, including managing patent cliffs for key products and adapting to ongoing pricing and policy headwinds. The robust pipeline and strategic focus, however, position Amgen for sustained performance in the coming years.
