Last week was a little bumpy for Amgen Inc.

The Thousand Oaks biotech giant reported a 16 percent drop in fourth quarter earnings, attributed largely to rising costs, and it faced increasing flak over a beneficial deal from Congress for reimbursement for one of its drugs to treat kidney dialysis patients.

Yet through it all, several analysts remained bullish. They were impressed with better-than-expected sales for two of Amgen’s drugs and the overall health of the company as it transitions from its longtime blockbuster anemia medications to a new set of drugs.

“We think Amgen is undervalued versus its pharmaceutical peers,” Eric Schmidt, analyst with Cowen and Co. in New York, said in a note late last week. He noted that Amgen’s shares trade at 12 times earnings per share, while the industry average is between 13 and 14 times EPS.

Another analyst, Michael Yee of RBC Capital Markets LLC in New York, said Amgen remains a “better pharma” and reiterated his “outperform” rating.

Last week, Amgen reported fourth quarter net income of $788 million ($1.01 a share), down 16 percent from the same period a year earlier. Revenue rose 11 percent to $4.4 billion.

Excluding one-time items, net income would have been $1.40 a share, 2 cents higher than the average estimate of analysts surveyed by Thomson Reuters.

Shares of Amgen fell 45 cents, or 0.5 percent, on Jan. 24, the day after the earnings release.

The main reason for the earnings drop was a 12 percent jump in operating expenses, with increases in both research and development and cost of sales.

More important to analysts, however, revenues topped the Wall Street consensus of $4.37 billion.

Amgen’s best performer was Enbrel, which treats rheumatoid arthritis and other immune system disorders and saw sales jump 23 percent to $1.16 billion. Sales of two of its newest drugs for bone-loss treatment – Prolia and Xgeva – jumped 90 percent and 60 percent, respectively. All of these increases were well above analysts’ estimates.

These increases help offset continued decline in Amgen’s struggling anemia franchise drug, Aranesp, which saw sales fall 9 percent to $489 million.

“We enter 2013 with good momentum, a broad late-stage pipeline and a continued focus on building our business internationally,” Chief Executive Robert Bradway said in a statement accompanying the earnings release.

Meanwhile, Amgen is facing growing controversy over a break that was slipped into the massive “fiscal cliff” legislation Congress passed over the new year’s holiday. According to the New York Times, which broke the news, Amgen won a two-year reprieve from Medicare price controls for its dialysis patient treatment drug Sensipar.

Schmidt said in a Jan. 2 research note that the reprieve would allow Amgen to reap an additional $100 million to $200 million in Sensipar sales until the new price control deadline of 2016.

In a Jan. 8 presentation to investors, Bradway said, “this is a product for us globally now that’s approaching $1 billion (in sales) and we think that this legislation should provide incremental visibility for the growth opportunity here in the U.S.”

But criticism of the provision grew after it became public, especially since it came two weeks after Amgen pled guilty to illegally marketing Aranesp and agreed to pay criminal and civil penalties totaling $762 million.

Amgen issued a statement after the New York Times article, saying the two-year reprieve was necessary to ensure dialysis patients would continue to have access to the drug while negotiations between Amgen and the federal Centers for Medicare and Medicaid Services continued over the appropriate Medicare reimbursement level for the drug.

Last week, Rep. Peter Welch, D-Vt., introduced a bill to repeal the two-year reprieve and impose Medicare price controls on Sensipar.

For reprint and licensing requests for this article, CLICK HERE.