Friday, March 09, 2007

Amgen = Biotech Value

The biotech sector as a whole has gotten cheap. Many are trading at or below their long term growth rates. One obvious value is Amgen (Ticker: AMGN), yes Amgen. The market definitely over reacted to today's news about the black box warnings on Aranesp and Epogen. This label change is targeted towards off label use. Here's what the analyst had to say about Amgen's black box warning (March 9th edition of BioWorld).

"With this negligible off-label use in chemotherapy-induced anemia, we believe tighter FDA language regarding hemoglobin maintenance would have little effect on [sales]," wrote analyst Chris Raymond in the Baird report.

Bret Holley with CIBC World Markets in New York did not see much consequence in the label change, either, since they reflect findings in studies already disclosed. He allowed that "there could be some incremental reductions in overall EPO usage over the longer term," plus dosing vigilance and limits in the cancer-anemia setting. But Amgen's stock value "may be overly discounting doomsday scenarios" for EPO drugs, "given the totality of historical safety data and physician experiences with the drugs."

Just about every piece of bad news has been priced into the stock. The company is trading at ~13X this years earnings and ~12X next years earning. The company's long term growth rate is ~ 15%. Amgen stock is cheap and sometimes you just have to step in when there's blood on the street.

2 Comments:

At March 10, 2007, Blogger z-stock said...

Glad to see you posting again
On Mar 1st I picked up this headline.
AMGN Aranesp 500 MILLION LOST SALES
I shied away from Biotech, until Friday. AMGN GENZ BIIB seem very good at these prices.

 
At March 11, 2007, Blogger Money Turtle said...

I agree the biotechs look good at these levels. Maybe time to start backing up the truck.

 

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