Sizz's Biotech Blog: What can we make of Amgen?

Amgen (AMGN) reported earnings last night and investors are giving the stock a 4% boost today. The stock, which is down some 36% in the past year, has struggled since mid-2005. The company's growth has slowed, and the company has a cloud over it with a pending FDA panel review of anemia drugs. The panel meets in March, and could place restrictions on drugs that treat anemia from chemotherapy, which could affect Amgen's Epogen and Aranesp.

Amgen's 2007 earnings were nothing to boast about, as the company posted $14.77 billion in revenues, only a 3.5% gain, and $4.8 billion in adjusted profit, a 4% gain over 2006. It must be noted, however, that Amgen did still grow despite a 25% drop-off in fourth quarter sales of Aranesp.

Looking forward, the picture is equally mixed, at least according to analysts. With the stock off nearly $30 from its highs, some analysts are calling Amgen the potential comeback story for 2008. Others aren't ready to join the stock.

The bulls say:

Amgen's anemia drugs don't make up enough of the company's total sales to make too much of a difference.
Cowen analyst Eric Schmidt: "We would expect the recovery to begin March 14." (The day after the FDA panel review.
Positive results from a Phase III trial of osteoporosis drug Denosumanb will lead to a return of growth in 2009.
Leerink Swann analyst Bill Tanner: "We believe investors will once again revisit AMGN shares by virtue of the valuation and better business prospects beyond 2008."

The bears say:

Results of the FDA panel meeting could provide for more downside.
Banc of America analyst William Sargent says Aranesp could lose at least 25% of its patients
FBR analyst Jim Reddoch: "There is still downside potential if the (anemia drug) label is tightened."

There is a lot of opinion about Amgen out there. The stock seems cheap as it trades at less than 12x 2008 earnings (depending on the earnings estimate) and the company has a decent pipeline and enough resources to fund it and even add to it. However, there have been dark clouds over the stock for a while now and it could take some time for investors to return, especially with other big-cap biotechs thriving.

Disclosure: I do not have a position in AMGN