Drug pipeline keeps Amgen healthy
By John Loesing
Acorn Staff Writer

Shares of Amgen, the Thousand Oaks-based biotech giant, recently pulled back from their 52-week high, but analysts say the company’s first-quarter earnings report gives an indication that strong growth lies ahead.

Amgen also upped its profit forecast for the remainder of the year, further proof that the company’s July 2002 acquisition of the biotech firm Immunex is beginning to pay handsome dividends.

For the period ending March 31, Amgen said it earned $493 million or 37 cents per share, compared with $341 million or 32 cents per share in the year-earlier period.

Excluding expenses relating to the acquisition of Immunex, Amgen said it made $558 million or 42 cents per share. The company had been expected to earn 39 cents per share. Revenue climbed 76 percent to $1.76 billion from $1 billion in the same quarter last year.

"Amgen is an execution story and it’s working, is really what it comes down to," said Craig West, biotech specialist for A.G. Edwards.

Amgen now expects per share adjusted earnings to range between $1.80 and $1.90 for the full year, vs. previous estimates of $1.70 to $1.80.

"Given our strong trends, we are raising sales and guidance for the year," said Kevin Sharer, chairman and chief executive officer.

Shares touched a year-high of $64.45 just a few weeks ago, but fell into the $60 range Monday following news that Amgen’s pricing power with the elderly and the uninsured might be reduced.

Epogen, for example, Amgen’s popular anemia drug, costs individuals up to $12,000 year. "I think the days when you can make any kind of health care decision without thinking what it’s going to cost you ... those days are gone," West said.

But demand for the company’s four main drugs still remains high and West said a $70 target for the stock is well within reach. Amgen shares have split five times since 1990.

The acquisition of Immunex gave Amgen the blockbuster Enbrel, a rheumatoid arthritis drug that produced $274 million in first-quarter sales. The drug is poised for its "best year ever," A.G. Edwards says, but faces stiff competition.

Amgen is the world’s largest biotechnology company and the bulk of its sales come the four proven commodities: Neupogen and its next generation drug Neulasta, which are used to prevent infections in patients undergoing chemotherapy; and Epogen and its successor drug Aranesp, which are used to combat anemia in patients with severe kidney disease.

"(Enbrel) is a good drug, but does not have the kind of margins to be a real headliner for them," West said. "I would argue that Aranesp will nudge out the other products as being the most important out there."

Sales of Aranesp jumped from $39 million in the first quarter last year to $255 million this year. The drug gives Amgen several new markets that the company previously had been denied due to Epogen licensing agreements.

"Aranesp, because it is outside the original Epogen agreement, is free and clear of those constraints everywhere," West said. "So instead of have a two or two and a-half billion dollar marketplace, they suddenly walk into 10. That’s the reason Aranesp is such a big deal."

The company’s pipeline research deals with cancer, kidney, inflammatory, bone and neurological diseases. Amgen expects to file for regulatory approval next year to use Enbrel as a psoriasis treatment.

Community Appeal

Everybody knows somebody who works at Amgen, local residents are fond of saying.

The company that has its own street named after it (headquarters at One Amgen Drive is practically its own town) currently employs almost 6,000 people. Amgen "slowly but steadily" is adding about 200 to 250 jobs per year, said Gary Wartik, Thousand Oaks economic development director.

"It contributes mightily to the economy and a company that contributes 5,800 jobs, many of which are very good paying jobs, plays an important role," Wartik said.

Wartik wouldn’t release what amount Amgen pays the city of Thousand Oaks each year in business taxes, but he said it’s "significant."

"While Amgen certainly pays its fair share of taxes, its principal benefit is that it’s here, it reflects well on the community and says the Thousand Oaks, Westlake Village, Newbury Park area is a good place to live and work," Wartik said.

In addition, the Amgen Foundation donates millions of dollars each year to regional and national charities. The company’s Teachers of Excellence Award is a well-known conduit for teacher recognition.

Despite its reputation for altruism, Amgen’s first allegiance is to its shareholders. Analysts say a 7 to 10 percent on investment isn’t unreasonable given the demand for the company’s drugs.

Founded in 1980 as AMGen (Applied Molecular Genetics), Amgen pioneered the development of novel and innovative products based on advances in recombinant DNA and molecular biology.

The company chose Thousand Oaks as its headquarters so it could be near the major research centers of UCLA, the University of California Santa Barbara and the California Institute of Technology.

Today, more than 10,000 Amgen employees work in 19 different countries.