Amgen: Murphy's Healthy Pick

08/29/2002 12:00 am EST

Focus:

Michael Murphy

Former Editor, New World Investor

Michael Murphy is already well-known as a leading high-tech money manager and analyst, and his California Technology Stock Letter, Technology Investing, and Biotechnology Investing publications are among the most popular and widely quoted newsletters around. At The San Francisco Money Show, he launched his latest newsletter – Healthy Investing. Check out his first featured recommendation.

Amgen (AMGN OTC) is the world’s largest biotechnology company with total product sales last year of $3.5 billion and net income of $1.1 billion. With a market capitalization of over $60 billion, Amgen is now valued more highly than once-revered pharmaceutical giant Bristol-Myers Squibb. Part of the reason is that Amgen has had tremendous success in bringing enormously profitable drugs to market. An equally important factor is that investors believe in Amgen’s ability to keep growth going into the future. That’s why we’re interested.”

“The company’s first drug, Epogen, is also its top seller. Epogen is a manufactured version of the human protein erythropoietin. It is used commonly to treat anemia (low levels of red blood cells) associated with kidney dialysis and brought in $2.1 billion in sales in 2001 – a figure that has been climbing steadily since the drug was approved in 1989. Amgen has improved upon their original success and introduced Aranesp, a new and improved version of Epogen. Aranesp was recently approved to treat anemia associated with various cancers (in addition to kidney dialysis). That’s important because under an old licensing agreement, Amgen was not allowed to sell Epogen for this indication and the market was left to Johnson & Johnson. Now, Amgen can compete shoulder to shoulder in this very lucrative $2.5 billion market segment.”

“The other big news was the acquisition of Immunex earlier this year giving Amgen access to another blockbuster drug: a treatment for rheumatoid arthritis called Enbrel. It has been so wildly sought-after that Immunex wasn’t able to make enough to meet demand. Amgen projects Enbrel sales will exceed $1.2 billion next year. Given the rough stock market in 2002, AMGN is lower now than when they announced the Immunex acquisition, and lower than when Aranesp was approved. That’s the kind of entry point I love. I want you to buy AMGN under $48 (with a stop loss at $41). My initial target is $60 by the end of the year. But frankly, I hope we profit from this amazing company for many years.”

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