Amgen’s $12 Billion Gamble: What’s Behind the Selloff?

Amgen’s shares plummeted by about 5% on September 4, wiping out a staggering $12 billion in market value, after Novartis released disappointing Phase 3 trial results for pelacarsen, an Lp(a)-lowering therapy. Although Amgen doesn’t own the drug, this selloff is more than just collateral damage; it’s a calculated gamble gone wrong.

The Lp(a) Hypothesis Under Fire

The Lp(a) hypothesis has long been a cornerstone of cardiovascular risk reduction. Pharmaceutical companies hoped that lowering levels of this genetic risk factor would reduce heart attacks, strokes, and other cardiovascular events. However, Novartis’ pelacarsen failed to deliver on its promise when it came to actual outcomes. This has significant implications for Amgen’s late-stage asset olpasiran, which relies on the same biological premise.

Some may argue that Amgen’s stock reaction is an overreaction, given the company’s diversified portfolio and strong track record in other areas. However, investors are taking a serious look at the Lp(a) hypothesis, questioning whether it will translate to better cardiovascular outcomes. If pelacarsen can’t deliver, what makes anyone think olpasiran will be any different?

A Cushion of Diversification

Amgen’s diversified portfolio is one reason why its selloff wasn’t more severe. Top-selling products like Repatha and Tezspire drive significant revenue, providing a cushion that absorbs some impact from olpasiran’s potential failure. However, this diversification creates a false sense of security; investors may be too quick to write off olpasiran as a minor blip on the radar.

The outcome of the Lp(a)HORIZON trial has significant implications for Amgen’s future prospects. If pelacarsen can’t deliver on its promise, what does that say about Amgen’s chances? The fact that Eli Lilly is running a similar experiment with lepodisiran adds to the uncertainty.

A Market That’s Not Yet Panicked

As of writing, short interest in Amgen remains low at 2.4% of float, suggesting investors are not yet convinced that olpasiran will fail – or at least, they’re not betting against it in a big way. Insider data shows that hedge funds continue to hold onto Amgen shares, with 66 funds holding the stock as of the second quarter of this year.

However, for how long? As more information comes out about the Lp(a) hypothesis and its limitations, investors may start to reevaluate their positions. For now, it’s clear that Amgen’s $12 billion gamble has left investors wondering what’s next.

The Road Ahead

In the short term, investors will be keeping a close eye on Amgen’s stock as more information becomes available about olpasiran and its prospects. Will the company deliver on its promise, or will it join pelacarsen in the ranks of failed Lp(a) therapies? In the long term, this outcome has significant implications for the entire pharmaceutical industry – if the Lp(a) hypothesis is proven false, what does that say about our current understanding of cardiovascular risk reduction?

For Amgen, the stakes are high. With a diversified portfolio and a strong track record, the company may be able to absorb some impact from olpasiran’s potential failure. But this selloff is a wake-up call for investors, a reminder that even the largest and most successful companies can fall victim to market whims. As Amgen’s stock continues to fluctuate, one thing is clear: the Lp(a) hypothesis has been put on notice.