Why Amgen's Strong Earnings and Guidance Fail to Justify a Buy Rating in 2025

Amgen's second-quarter 2025 earnings report, with revenue rising 9% to $9.2 billion, appears to signal resilience in a sector grappling with pricing pressures and biosimilar erosion. Yet, beneath the veneer of growth lies a fragile foundation. The company's guidance for $35–36 billion in 2025 revenue and a projected non-GAAP EPS of $20.20–$21.30 may tempt investors to overlook critical structural headwinds: declining core drug sales, intensifying biosimilar competition, and an uncertain foothold in the obesity market. These factors collectively undermine the case for a “buy” rating, even as Amgen's short-term financials gleam.

1. Core Drug Sales: A House of Cards Built on Volume

Amgen's recent growth is driven by volume expansion in newer therapies like Repatha, EVENITY, and TEZSPIRE, which saw sales rise by 31%, 32%, and 46%, respectively. However, these gains are overshadowed by the collapse of legacy products. Enbrel, once a $1.1 billion-a-quarter blockbuster, plummeted 34% year-over-year to $604 million, dragged down by biosimilars and U.S. Medicare Part D redesign. Similarly, XGEVA and Prolia—both facing U.S. patent expirations in early 2025—declined by 5% and 4%, respectively, with biosimilars like Sandoz's Wyost and Jubbonti poised to accelerate erosion.

The math is stark: Enbrel alone accounted for 6.5% of Amgen's total revenue in 2024. Its decline, coupled with flat sales for KYPROLIS and shrinking margins in established products, signals a top-line vulnerability. While management touts “innovation-driven growth,” the reality is that Amgen's revenue engine is increasingly reliant on a handful of high-volume, low-margin biosimilars like MVASI and AMJEVITA, which generated $172 million in Q2 2025—flat compared to 2024.

2. Biosimilar Pressures: A Tsunami on the Horizon

Biosimilars are not just a threat—they are a structural shift. Amgen's own biosimilars, such as MVASI and AMJEVITA, are cannibalizing its branded portfolio while yielding minimal margin expansion. For instance, MVASI's 22% sales growth in Q2 2025 was driven by favorable deductions and inventory buildup, not sustainable demand. Meanwhile, competitors like Sandoz and Celltrion are flooding the market with cheaper alternatives to Prolia, XGEVA, and Enbrel, eroding Amgen's pricing power.

The company's response—expanding its biosimilars portfolio—risks further margin compression. Biosimilars typically yield 30–40% lower gross margins than branded drugs, and Amgen's 48.9% non-GAAP operating margin in Q2 2025, while impressive, masks the fragility of its revenue mix. With 15 of its top 20 drugs facing biosimilar competition by 2027, Amgen's ability to sustain its current margin profile is questionable.

3. Obesity Market Ambitions: A High-Stakes Gamble

Amgen's foray into the obesity market with MariTide—a bispecific GLP-1/GIP agonist—has been hailed as a potential game-changer. Phase 2 trials showed up to 20% weight loss in non-diabetic patients and 17% in diabetic patients, with monthly dosing offering a convenience edge over weekly injectables like Wegovy and Zepbound. However, the data also revealed significant gastrointestinal side effects, prompting a revised titration protocol.

The obesity market, projected to reach $100 billion by 2030, is already dominated by Novo Nordisk and Eli Lilly, whose GLP-1/GIP dual agonists (e.g., tirzepatide) have established first-mover advantages. Viking Therapeutics' oral VK2735 and Roche's in-licensed candidates further intensify competition. Amgen's ambition to capture 20–30% of this market—translating to $2–3 billion in annual revenue—hinges on MariTide's Phase 3 results, which are expected in late 2025. Yet, even if successful, the drug's differentiation may be limited to its dosing frequency, not efficacy, which could leave it playing catch-up in a crowded field.

4. Financial Optimism vs. Structural Realities

Amgen's free cash flow of $1.9 billion in Q2 2025 and a 6% dividend increase may seem attractive, but they mask deeper issues. The company's operating margin, while robust, is underpinned by cost-cutting and debt reduction ($1.4 billion retired in Q2 2025), not organic efficiency. Moreover, its forward P/E of 13.26, below the industry average, reflects market skepticism about its long-term growth prospects.

The 2025 guidance assumes a $35–36 billion revenue target, but this excludes potential pricing pressures from the Inflation Reduction Act and U.S. political shifts. With the obesity market still unproven and core drugs in decline, Amgen's growth narrative relies heavily on speculative bets. For a company with a $159.6 billion market cap, such uncertainty is untenable.

Conclusion: A Buy Rating Is Premature

Amgen's short-term financials are undeniably strong, but its long-term outlook is clouded by structural headwinds. The decline of Enbrel and XGEVA, the margin-sapping impact of biosimilars, and the uncertain trajectory of MariTide in the obesity market all point to a company in transition rather than one in ascension. While Amgen's innovation pipeline is commendable, the risks of overpaying for speculative growth in a high-competition sector outweigh the rewards.

For investors, patience is key. A “buy” rating in 2025 would require clearer evidence that Amgen can offset its core drug erosion with sustainable obesity market gains and maintain its margin resilience. Until then, the fundamentals suggest a cautious approach.