Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Jacob Snyder who wrote (426)	1/4/1998 7:27:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 1906

SmartMoney: Street Smart -- Contrarian: In the Recovery Room This story appears in the January issue of SmartMoney magazine. By Peggy Edersheim Kalb Looking for the next Amgen? Not a bad idea, considering that investors who stuck with the biotech company for the past decade made nearly 30 times their money. But if you're seeking a hot biotechnology company with some potential blockbuster drugs in its pipeline, Amgen itself might be a good place to start. Many would disagree, of course. From May through October investors dumped their Amgen shares, sending the stock down by a third. It now sits at $51, well below its all-time high of $69. What's worse, the company is being derided by some analysts as a has-been -- the biotech granddaddy gone soft just eight years after introducing its first billion-dollar product. Sales of Amgen's two blockbuster drugs have slowed, and its expensive pipeline has yet to produce a third. This once highflier now trades at around 16 times projected 1998 earnings -- a deep discount to pharmaceutical stocks and even cheaper compared with the hot biotech companies. Time to write it off? Not so fast, says T. Rowe Price biotechnology analyst Kris Jenner (M.D., Ph.D. in molecular biology). His analysis led T. Rowe Price to the stock recently, looking for a 25 percent return. "My sense is, this is a really high-quality company that has exciting, albeit hard-to-quantify, growth prospects," says Brian Rogers, manager of the T. Rowe Price Equity-Income and Value funds and an Amgen investor. This isn't the first time Amgen's stock has gotten beaten up by Wall Street; in fact, it's the fourth time in six years. And each instance has turned out to be a buying opportunity. What started the latest rout? First, early tests of its antiobesity drug proved to be less impressive than Wall Street had hoped. Then the federal government changed its payment policy for Epogen, resulting in reduced dosages for some patients and cutting the drug's growth rate nearly in half. Epogen, used to stimulate the production of red blood cells, was Amgen's first blockbuster drug and a key part of the company's phenomenal revenue growth. But Smith Barney Senior Biotechnology Analyst Meirav Chovav says Amgen handled the crisis well. "I think management was caught by surprise in terms of the impact that changes in the guidelines had," says Chovav. "But I think that Amgen management is very capable and has geared up to deal with this, and they're dealing with it very effectively." And she adds that survey data show the government's changes went too far; she sees the growth rate rebounding. Besides, the company has other things going for it, leading Chovav to forecast annual earnings growth of 14 to 15 percent over the next few years. These factors include the company's $1 billion stock buyback program and healthy growth rates for its two major products, as well as low debt levels and dramatic cuts in costs. Chovav estimates Amgen will earn $2.72 in 1997, $3.10 in 1998 and $3.55 in 1999. Then there is Amgen's drug pipeline. Chovav is betting it will kick in by the year 2000 and give Amgen an annual growth of at least 20 percent thereafter. Furthest along is NESP, a second- generation descendant of Epogen that Chovav calls "Amgen's billion-dollar stealth project." She believes it could get FDA approval and come to market by 2000. Other drugs under research -- none of which are factored into the stock price -- include one to stop chronic bleeding and several to fight Parkinson's disease, as well as a host of smaller drugs. All in all, says T. Rowe Price's Rogers, the worries about Epogen have been exaggerated: At $51 a share, "this is a good opportunity that doesn't come along all that often." DOW JONES NEWS 12-23-97