Amgen's Trump Pricing Deal Offers Modest Relief Amid Ongoing Volume-Driven Growth Strategy

What happened

Amgen has entered into a drug pricing agreement with the Trump administration, which aims to cut U.S. drug costs, expand direct-to-consumer access, and provide tariff relief linked to domestic investment. This development occurs against a backdrop where the company's 1H25 product sales grew 10% on 14% volume growth but faced 4% price declines, as detailed in recent SEC filings. The deal could help alleviate some of the IRA-related pricing headwinds identified in the DeepValue report, which lists adverse pricing dynamics as a key risk to the BUY thesis. However, Amgen's growth trajectory remains heavily dependent on executing biosimilar launches like Stelara and Eylea, managing denosumab erosion in 2025, and advancing oncology assets such as Imdelltra. While the agreement may provide a near-term buffer, it does not eliminate the fundamental need for sustained volume gains to offset persistent pricing pressure.

Implication

Investors should interpret this deal as a tactical win that may ease some regulatory and pricing uncertainties, potentially supporting Amgen's cash flow stability in the short term. It aligns with the company's scale advantages in biologics manufacturing and biosimilars, which are central to the DeepValue report's growth narrative. However, the agreement's benefits are contingent on effective implementation and may not fully counter broader IRA impacts or intensifying competition in key therapeutic areas. Amgen's robust operating cash flow of $11.5B in 2024 and deleveraging efforts remain critical, but the deal does not address core challenges like denosumab erosion or biosimilar market share capture. Therefore, while the risk/reward profile improves slightly, the investment case still hinges on executing volume-driven strategies and managing pipeline milestones, as outlined in the report.

Thesis delta

The DeepValue report's BUY thesis, based on attractive valuation and growth vectors like biosimilars and oncology, is modestly strengthened by this pricing deal, which reduces near-term pricing risk. However, no major shift is warranted, as key risks—including denosumab erosion, biosimilar execution, and deleveraging—remain unchanged and require close monitoring. Investors should view this as a supportive factor that reinforces the importance of volume growth over price, but not as a game-changer that alters the fundamental investment rationale.