Amgen Looking Attractive Heading into Earnings

Amgen Inc (AMGN) is looking very attractive heading into earnings with the additional good news of NPlate being approved by the Food and Drug Administration on Wednesday or Thursday.

Strong Volume

Amgen Inc has been on a nice run since it broke out of a range on June 24^th, moving from 45 to 55 in a month’s time. Over the past 10 days, Amgen’s daily volume has increased to an average of 12 million shares a day compared to a three month average volume of only 9 million shares a day. This additional 3 million shares a day in volume is a bullish sign coinciding with the increased price.

Options

The front month options for Amgen were also bullish today as investors were active in the 57.50 August Calls. With the stock price currently at $54.60, Calls at strike prices of 55 and 57.50 having strong demand demonstrate investors' bullish bias in the near term for the stock.

NPlate

NPlate is a drug developed by Amgen to treat blood-clotting disorders that is set to receive FDA approval this week. 200,000 people in the United States are affected by the disease that NPlate treats. An outside panel recently recommended approving the drug and the FDA is expected to follow the panel’s suggestion and clear the drug for use. Not a huge market for a drug but the stock is still demonstrating strength going into the announcement.

Earnings

In addition to the NPlate approval, Amgen also announces its quarterly results on the 28^th of July. Not only is Amgen on deck for an earnings release, but the rest of the week is full on drug and biotechnology stocks reporting. As other companies report outstanding results as Biogen Idec (BIIB) did yesterday, Amgen stock should continue to rally.

The Trade

Buying Amgen ahead of the NPlate approval and its earnings is appropriate. Wait for a dip in the morning and avoid buying after a bounce of over 3% during the day. Place a stop 7.5% below its current price to limit your risk in case of a down turn. Sell your position during the day on Monday the 28^th prior to earnings as a negative surprise after the close could lead to a gap down in the following morning.

Disclosure: Long.

Comments

[yoy:]

Amgen's has come way too far too fast over the past month (about 25%)......and it was on virtually no news at all. Yet, the same problems that have dogged the company from the FDA since Janurary 2007 continue to exist today. Yes, they've met the (FDA induced) reduced revenues with reduced expenses by closing facilities and reducing personnel but their near term pipeline is still dismal. Everyone seems to be pinning their hopes on Denosumab and that it will blow away expectations. If Denosumab fails to deliver the expected grand slam, look out below. Denosumab is the only important late stage product left in Amgen's pipeline. I'd say this is a "buy the rumor, sell the fact" situation so any profits should be banked here and then take a wait and see approach.

2008 Jul 23 09:47 PM

[CLOUDCLUSTER:]

yoy: I completely agree. Amgen is in major overbought territory, perhaps the most ever in its history. At this point I feel Nplate + an earnings beat on Monday is priced in. MACD, RSI, CCI, MA, whatever technical indicator you want to look at... they're screaming sell/buy protection. It's inevitable that the market pauses for a retracement back to the 50 day.

2008 Jul 24 09:42 PM