Amgen’s Quarterly Report Gives Ammunition to Naysayers

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Amgen Inc. naysayers have been predicting the company’s inevitable fall as a fast-growing biotech darling long before its market cap passed $82 billion. The Thousand Oaks company’s latest quarterly report with its soft earnings, mixed clinical trial data and a cautious 2007 outlook only added fuel to the fire.


The company reported a 1 percent increase in fourth-quarter net income (before-charges) of 90 cents a share on Jan. 25. That missed some Wall Street projections by as much as 3 cents. And a 17-percent rise in revenues to $3.84 billion was countered by clinical trial data that clouded long-term growth prospects for three separate drug treatments.


Investors responded by slicing 6.5 percent off Amgen’s stock price over the next two trading days, with shares hitting bottom at $69.97, before closing at $70.37 on Jan. 31, 12 percent off their 52-week high. Even Chief Executive Kevin Sharer told analysts that despite having come off “one of our very, very best years ever,” the company faces an array of challenges.


Credit Suisse analyst Michael Aberman has warned that Roche’s Mircera, which could reach the U.S. market in May despite unresolved patent issues, could lead to a 10 percent drop in sales of Epogen, Amgen’s original anemia treatment.


The most worrisome clinical study had hoped to show that Aranesp a second generation, longer acting version of Epogen could reduce the need for painful and costly blood transfusions in anemic cancer patients. Not only was no statistically significant benefit found, there were indications that aggressive treatment might increase the risk of death.


Amgen spokeswoman Trish Hawkings notes that opposed to an earlier trial, many of this study’s participants were late-stage cancer patients not undergoing treatment for their cancer. But while that study’s sample may have skewed results, it followed recent studies that large doses of Epogen could cause serious side-effects.


Almost lost in the bad news were positive results for two experimental treatments, AMG 706 and AMG 531, which treat thyroid cancer and an autoimmune bleeding disorder, respectively. The later drug is on track to be submitted for U.S. regulatory approval this year. And Hawkins notes that the company still has three other label expansion studies proceeding well that could expand Aranesp’s market.


Other Amgen watchers agree. Jim Miller, a Chicago-area private investment manager who writes a respected column for the online site SeekingAlpha.com, agrees with CNBC pundit Jim Cramer that Amgen should be considered more of a fallen angel that deserves to trade higher than market valuations.


“When the market sees anything to worry about it tends to overreact and not read past the headlines especially with all the drug product scares we’ve seen in recent years,” said Miller, a veteran biotech investor who owns Amgen shares. “This is a company with a long-term growth rate of 17 percent with a stock you can buy at 15 times forward earnings or less. You don’t see many opportunities like that.”



Acquisition Assignment


On Assignment Inc. has closed its acquisition of Oxford Global Resources Inc., a provider of information technology and engineering staffing services.


The acquisition gives the Calabasas health care industry staffing firm entry into the growing market for information technology and engineering staffing services. Oxford is expected to generate 2006 revenues of approximately $177 million, as well as higher than industry average bill rates exceeding $100 per hour.


The purchase price includes $190 million in cash and $10 million in common stock. In addition, Oxford shareholders have the opportunity to achieve an earn-out of up to $12 million based on Oxford’s 2007 and 2008 EBITDA performance.



Cedars Gift

Los Angeles billionaire Eli Broad’s Broad Foundation is providing Cedars-Sinai Medical Center a $1 million endowment to fund a women’s heart research fellowship within its Women’s Heart Center.


The Edythe L. Broad Cardiology Research Fellowship will be directed by Dr. C. Noel Bairey Merz, an internationally recognized cardiologist specializing in heart disease in women. Scientists selected for the one-year fellowship will study coronary microvascular function as well as a variety of other women’s heart disease research topics.


Microvascular coronary artery disease which is difficult to diagnose and four times as prevalent in women than men affects the ability of small arteries in the heart to provide needed oxygen to the heart muscle.



Staff reporter Deborah Crowe can be reached at (323) 549-5225, ext. 232, or at [email protected].

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