The Best Biotech Bet for 2004

12/05/2003 12:00 am EST

Focus:

Michael Murphy

Former Editor, New World Investor

"So far in 2003, there have been an incredible 17 biotech drugs approved, compared with only six in 2002," says Michael Murphy in his Technology Investing."Next year should be interesting, and biotech should continue to shine." Here's a favorite in the sector.

"Amgen (AMGN NASDAQ), the world's largest biotech company, should have a very active 2004. The good news for us: That hasn't yet been priced into the stock and should mesh nicely with a better appreciation of non-cyclical market leaders. Add to that its great growth prospects, good upcoming news flow, and an undervalued price, and you get tremendous potential. Amgen is the world's largest biotechnology company. The company has a compelling roster of drugs yet makes most of its money off its groundbreaking blockbuster drug Epogen (used to boost red blood cells) and a follow-on product called Aranesp, a re-engineered, long-acting version of Epogen that can be dosed less frequently.

"The company's other major products include: Neupogen, which boosts white blood cells and allows chemotherapy patients to better fight off infection and regain strength, and Neulasta, which is the long-acting version of Neupogen. Enbrel has become the most popular biologic treatment for rheumatoid arthritis, and has also been approved to treat psoriatic arthritis. All of this is very impressive, but I'm just as excited about what's to come with the company. Next year, Amgen should get two key drug approvals. Cinacalcet is used to treat hyperparathyroidism in patients with chronic kidney disease. A second key event will be the approval of Enbrel to also treat psoriasis. Another potential $500 million drug is Palfermin, used to treat oral mucositis (a common side effect of radiation and chemotherapy).

"Beyond the products that will likely be approved next year, Amgen's pipeline still has a good deal of enthusiasm brewing, including the epidermal growth factor receptor inhibitor ABX-EGF as well as experimental new treatments for Parkinson's disease and others. With over $5 billion in its war chest, Amgen can also afford an aggressive R&D budget and some late-stage product acquisitions. I think 2004 will be Amgen's year. Buy AMGN under $61 for my 2004 target of $75."

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