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Tuesday, Nov 28, 2023

CORPORATE FOCUS—Amgen Expects Enhanced Profits With New Drugs

Summary Business: Maker of drugs & therapeutic products Headquarters: Thousand Oaks CEO: Kevin Sharer Market Cap: $70.4 billion Dividend Yield: N/A Total Liabilities: $1.09 billion P/E: 62.44 Long-Term Debt: $223 million Amgen Inc.’s stock has fluctuated in the past year, even as it prepares to unveil its latest blockbuster drugs and perhaps open a new era for the Thousand Oaks-based company. After reaching a low of $45.44 in April preceded by a 52-week high of $80.44 in February Amgen has held steady in the $65 to $70 range in the past month after announcing it expects federal approval of its anemia-fighting drug Aranesp sometime this summer. Amgen is not alone with its wild swings in stock price during the past year, said AG Edwards equities analyst Jonathan Lanfear. “The FDA (U.S. Food and Drug Administration) had a number of drug recalls last year and it really impacted the entire biotech industry. Investors got skittish and started dumping stocks,” Lanfear said. But while the company has been impacted by the same volatility affecting other biotech stocks, the promise of its new anemia-treating drug Aranesp could push Amgen into a position of relative stability. “Aranesp is going to be the biggest thing ever for Amgen,” said Michael King, an analyst for Robertson Stephens. Amgen’s stock dropped steadily through the early part of 2000, going from $72 in January to $52.25 in March. At the same time, the company’s net income dropped by $15 million in the quarter ending March 31, 2000 from its previous quarter. Net income in that quarter was $266.2 million on revenues of $814 million. Net income in the same quarter a year earlier was $247.2 million on revenues of $745 million. The company at the time attributed the decline to overbuying in late 1999 by its customers who feared supply problems due to the Y2K bug. But while sales later picked up, Amgen’s stock drifted up and down as news of tougher drug approval policies at FDA gained hold in the summer of 2000 alternated with reports that Aranesp and three other Amgen drugs could gain approval this year, Lanfear said. Lanfear said Wall Street worries that a pending patent infringement lawsuit by Transkaryotic Therapies Inc. and Aventis S.A. would go against Amgen drove the stock price from $78 on July 21 to $54 on Oct. 31, 2000. But when a federal judge ruled that Transkaryotic and Aventis instead had infringed on three of Amgen’s patents, the stock price shot up to $72 on Jan. 25 of this year. That case is under appeal. Amgen closed at $59.88 on April 26 when it reported $304.9 million in net income for the quarter on revenues of $901.6 million, compared to $266.2 million on revenues of $814.1 million a year earlier. Amgen closed Friday at $66.3 1 But the buzz over Aranesp and three other drugs coming for federal approval give Wall Street analysts reason to sing the praises of the 21-year-old company. While the FDA has yet to rule on the new drug, Amgen officials say it could bring billions in new revenue to the Thousand Oaks-based company. Amgen officials insist they are not fazed by news June 12 from the FDA that it has not approved the company’s anti-cancer drug Plenaxis. The FDA said the drug was “inadequate” as a cancer treatment. Officials say Plenaxis, along with Aranesp, will ultimately be approved and pave the way for a new era for the biotech firm. Amgen has two other drugs on the way to FDA approval later this year, Pegfilrastin, which lowers the risk of infection during cancer chemotherapy, and Anakinra, which treats rheumatoid arthritis. “These are products that we believe will be very successful for us,” said Jeff Richardson, a spokesman for the drug maker. Kevin Sharer, Amgen’s chairman and CEO, says the new drugs could generate $3.6 billion in revenue in its first year and between $8 billion and $9 billion within five years. Sharer said the company will see a “transformation” in the next two years as it launches its new drugs into the marketplace. By contrast, Amgen had launched just three new drugs in the past 20 years. That is not unusual, said Bill Tanner, an analyst with S.G. Cowen Securities Corp. Tanner said most biopharmaceutical companies take 10 to 15 years to develop drugs and, even then, they typically struggle to make them profitable. Epogen and Neupogen account for 90 percent of Amgen’s total sales and analysts say the introduction of four new drugs over the next two years will spur record sales, allowing it to provide drugs for cancer and dialysis patients, a market previously untapped by the company. Epogen accounts for nearly $4 billion in annual sales for Amgen.

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