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Biotech / Medical : Amgen Inc. (AMGN) -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (421)	12/11/1997 7:09:00 AM
From: Corky Cartwright	Read Replies (1) \| Respond to of 1906

Jacob, You state: 13 is the PE AMGN bottomed out at from early 1993 to early 1994. This was the last time this stock was out of favor, and I think that's where we are headed. Let's set the record straight. The period that you cite coincided with the Clinton/Clinton assault on the health care system. Investors were afraid that the socialization of medicine would impose punitive price controls on the prices of all pharmaceuticals. During the same time period, Merck sank below 30 dollars a share (with a correspondingly low P/E). I frankly see no similarities between then and now. If you applied your P/E analysis to other pharmaceutical companies, their prices would contract far more than Amgen's. Pharmaceuticals have historically trades at a significant premimum to the market. In fact, the ONLY exception I know to this pattern is the period during 1993-1994 that you cited. Amgen is currently out of favor with investors for a variety of reasons (an earnings writedown to settle the JNJ suit, dependence on two drugs for nearly all of its revenues, possible competitors in the production of EPO, possible reductions in Medicare reimbursements) and trades at a significantly lower P/E multiple than major pharmaceutical companies including those like BMY with modest growth prospects. A stock price of 35 for Amgen corresponds to a trailing P/E of 13. At its bottom during the Clinton/Clinton health care fiasco, Amgen had a P/E of 14. If you really believe your P/E model, then large pharmaceutical companies currently in favor with investors (like BMY trading at a P/E of 31) are much better targets for stock acquisition in 1998 than Amgen as they collapse from their current valutions back to the "realistic" valuation levels of 1993-1994. In fact, a compelling case could be made for shorting BMY, MRK, etc. I don't recommend it. I also doubt you will see Amgen underperform the market over the next year (as it has the past two years) because it is significantly undervalued relative to other pharmaceutical stocks. For the record, I own AMGN shares that I accumulated during 1993-94.