4 Reasons Amgen Looks Anemic

Amgen (AMGN) fails again.

The company's PREPARE trial failed to show any positive response in breast cancer patients treated with chemotherapy and its drug Aranesp before surgery.

Why am I not surprised? The only thing this dog has been successful at doing is giving investors fleas.

Amgen is the biotech everyone asks me about at conferences and in e-mails. I dislike the company, would sell it and see the stock going to $40 in the coming months. Why?

• It has a terrible pipeline and older drugs that are under pressure.

• This pipeline is a direct result of, arguably, the world’s worst R&D program – Despite 6,000 researchers and a $3 billion-plus research-and-development budget, the last time it introduced a drug that became a blockbuster, the Berlin Wall was still standing.

• Their anemia drugs are under severe pressure from several wings of the government and payers. Medicare is restricting payments; the FDA has issued guidelines to reduce use and dosing of patients; the company has spent millions on lobbying -- not a good sign for a supposed technology powerhouse. I see a big slowdown in revenue and a fall of as much as 25% of profits due these problems.

• Symptomatic of the company’s weakness and future failures was Friday’s announcement – conveniently made after the market close – that its drug Aranesp failed to perform in trials for treating breast cancer patients. The drug was used as part of a pre-operative regimen of chemotherapy.

I normally don’t spend a lot of time discussing the truly lousy companies -- but Amgen is one of the godfathers of biotech, widely held and with near-mythical support from individual and institutional investors. Right now, the stock is a "value trap.” Many uninformed or optimistic investors, individuals and professionals look at the fall in the stock price, and past revenue and earnings growth, and assume the company will find a way to reclaim all of these. It will not.

AMGN has a weak pipeline, its core anemia drugs (60% of revenue) will see slowing revenue growth or even sales declines in the coming quarters, the company has already used financial tools such as layoff announcements and stock buybacks to prop up the stock price, and there is little left in its quiver. The only thing left is more disappointing earnings and a falling stock price. Stay away.

Comments

[knowsmore]

and don't forget they have been known to train dialysis people how to extract the overfill and then charge for it. the medical education file would have some interesting expenses reported in them also

[Stanlan]

Wow this seems to be totally out of left field...weak pipeline, says who?
They're pipeline is fairly extensive, Denosumab being the most promising agent with blockbuster potential.
Slowing revenue growth? Let's not forget, the population is aging, not getting any younger, the baby boomer onslaught is at its very beginning. The incidence of diabetes is increasing, along with its complications such as end stage renal disease.
Epogen and Aranesp are not going away and will continue to drive revenues for now. - other than Procrit (which is basically Epogen), there is NO ALTERNATIVE. This is a company whose drugs are needed now more than when they were first introduced.

Amgen doesnt need to do a whole lot to increase shareholder value other than trek on as it is. Revenues will remain steady and gradual increase, eroding the current uncertainty that surrounds the stock, and allowing share value to increase.