Novice Investing - Amgen Suffers Anemia

Date: Tuesday 13th 2008f May 2008 08:04:49 PM

Amgen Suffers Anemia - 05/14/2007

By: Hari Wibowo

The largest biotechnology company in the world in terms of revenue ($ 14.2 Billion), Amgen Inc. (AMGN), has acted like a low-growth generic drug makers lately. The latest blow came this past Friday when the FDA decides to impose a limit on the usage of Amgen's blockbuster anemia drug.

Amgen's Aranesp had contributed to roughly 28 % of the company's revenue. Aranesp is used to treat anemia for chemotherapy patient, avoiding blood transfusions. Some say the limitation of Arancesp's usage by the FDA may cut Amgen's revenue by as much as half over the next several years. Amgen is not a one trick pony, however. Besides Aranesp (28% sales), Amgen's 2006 annual report shows several blockbuster drugs such as Enbrel for rheumatoid arthritis (20.4% sales), Epogen for anemia during renal disease (17.6% sales), Sensipar for renal disease, Neupogen for white blood cells treatment (27%) and Vectibix for colon cancer.

Late stage pipeline at Amgen mainly relies on Denosumab, which can treat diseases involving bone loss in several indications. Other than that, there is little indication of a potentially huge blockbuster revenue driver imminent in Amgen's late stage pipeline.

With the recent FDA restrictions on Aranesp, Amgen shares has now fallen to $ 57 per share, while EPS is predicted to clock in at $ 4.00 per share for fiscal year 2007. With roughly equal amount of cash and long term debt ( 80 cents/share of negative net cash), Amgen is currently trading at 14 times earnings, roughly a fair value for a 0% growth stock. No doubt, Amgen's existing pipeline excluding Aranesp, will continue to grow impressively. This indicates Amgen to be slightly undervalued at this current price. Amgen is not terribly undervalued, however and we think it is wiser to wait for price to drop further before making a decision to invest in Amgen.

END

Have questions or want to comment on this article? Proceed here

Distributing your own investing content is easy. Simply, click here.

Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Amgen Inc. (AMGN) or any other securities.

[Resources] [Forum] [Link Partner ] [Novice Investing Directory ] [ Submit Your Article Here ]