AP News, March 1st, 2007
Amgen Inc. shares have been anemic lately amid worries that sales of the company's blockbuster anti-anemia drugs might slow because of competition and safety concerns. Now, some analysts and investors say shares of the Thousand Oaks, Calif., biotechnology giant look like a bargain.
The stock hasn't been this cheaply valued by Wall Street in about a decade, and is weighed down by the possible launch of a rival anemia drug by Roche Holding AG later this year and recent disappointing patient studies.
"I would say the risks they face are squarely in the stock," said David Stepherson, portfolio manager with Hardesty Capital Management in Baltimore, which owns about 82,000 Amgen shares and has been a recent buyer. "I don't think there's a whole lot of downside here."
Stepherson believes Amgen can weather the challenges and has good long-term prospects, even if the near-term ride is bumpy.
Amgen shares have declined about 14 percent since hitting a 52-week high of $77 in late October, trading Wednesday at around $64. The stock now trades around 15 times Amgen's projected 2007 earnings. That's about half the price-to-earnings ratio of rival biotech heavyweight Genentech Inc. The last time Amgen's price-to-earnings ratio was this low was in the late 1990s.
On average, brokerage analysts expect the stock to rebound to around $81.50, according to Thomson Financial, which would be more than a 20 percent gain. Analysts expect Amgen's earnings to rise 14 percent this year and 12 percent in 2008, while new cancer drugs could help support growth in later years.
Amgen's anemia drugs, Aranesp and Epogen, are important because they generated nearly half the company's revenue last year. Amgen began selling Epogen, known clinically as epoetin alfa, or EPO, in 1989. It stimulates red-blood cell production and has reduced the need for blood transfusions in kidney-dialysis patients. Johnson & Johnson, under an agreement with Amgen, sells EPO under the brand name Procrit in the U.S. for chemotherapy-induced anemia.
Aranesp was introduced in 2001 as a second-generation anemia drug, and Amgen markets it in both the chemotherapy and dialysis settings. Aranesp sales were $4.1 billion in 2006, up 26 percent from 2005, while Epogen sales rose 2 percent to $2.5 billion.
Concerns about the drugs' safety picked up steam last fall. In November, two studies were published in the New England Journal of Medicine that questioned whether Epogen and its equivalents should be used to aggressively treat anemia in kidney disease.
One study found a higher risk of heart attack and other cardiovascular events in patients who were being treated to achieve the higher of two red-blood cell targets. The higher target, which measures hemoglobin levels, is above the Food and Drug Administration's recommended range.
Some doctors are now cutting back dose levels for Epogen. "I have to say we have a consensus that in our own dialysis unit ... we are targeting a lower hemoglobin level," said Ajay Singh, a kidney specialist at Brigham & Women's Hospital in Boston who authored one of the NEJM studies. "Since they're very linked to the use of EPO, there is a much more conservative view on dosing."
Concerns about Aranesp were heightened after Amgen disclosed last month negative results from a study of the drug in anemia of cancer, which is possibly caused by cancer itself, as opposed to the FDA-approved use in chemotherapy-induced anemia. Amgen said those taking Aranesp in the study had a higher risk of death than those on a fake treatment.
On Wednesday, the Atlanta bureau of the Securities and Exchange Commission asked Amgen to voluntarily provide information and documentation related to the study. Amgen, which disclosed the request in its annual report filed with the SEC, said it will cooperate fully with the request.
Amgen Chief Executive Kevin Sharer said that up to 10 percent of Aranesp sales may have been in the so-called "off-label" use as a treatment for anemia of cancer. Now, those sales are threatened. Last week, an influential drug-reference guide delisted Aranesp as a treatment for anemia of cancer, which could spur insurers to drop or reduce reimbursements for the drug in that use.
However, Michael Millenson, an oncologist at Fox Chase Cancer Center in Philadelphia, doesn't think there has been a huge change in prescribing patterns for Aranesp.
Doctors are still waiting to see more data about the drug's risks, and Millenson noted the patients in the Amgen trial weren't representative of the typical chemotherapy patient taking Aranesp because they had very poor prognoses.
