Amgen, Inc (NASDAQ:AMGN), The world's biggest biotechnology company by sales, is expected to release its fourth quarter earnings on Monday, January 25, 2010. In the last two quarters ending September 2009, the company's reported financial figures exceeded the market's consensus estimates by double digits.
The group's principal activities are to discover, develop, manufacture and market human therapeutics based on advances in cellular and molecular biology. It markets human therapeutic products in the areas of hematology, oncology and inflammation. The Group's key products include Aranesp(R) (darbepoetin alfa), EPOGEN(R) (Epoetin alfa), Neulasta(R) (pegfilgrastim), NEUPOGEN(R) (Filgrastim) and Enbrel(R) (etanercept) stimulate the production of red blood cells, for the treatment of anemia associated with chronic renal failure. Neulasta(R) and NEUPOGEN(R) selectively stimulate the production of neutrophils, one type of white blood cell, for treatment of infection in-patients undergoing myelosuppressive chemotherapy.
In the third quarter, the company generated revenue of $ 3.8 billion, down about 2% year over year revenue. Third quarter revenues were favorably impacted by tax considerations. Amgen's reported adjusted earnings per share increased 21% over the third quarter of 2008 to reach $1.49. Adjusted net income increased 16% to $1,518 million in the third quarter of 2009 compared to $1,308 million in the third quarter of 2008.
Analysts' estimates for the quarter ending December 2009 range from a low of $1.06 to a high of $1.28, compared to a consensus estimate of $1.166. According to Thomson Financial, for the fiscal quarter ending December 2009, the consensus EPS forecast has decreased over the past week from $1.208 to $1.166 (-3.48%) and decreased over the past month from $1.210 to $1.166 (-3.64%). Of the 23 analysts making quarterly forecasts, 1 raised and 8 lowered their forecast.
The downward revision in estimates is attributable to a variety of reasons such as higher taxes, higher operating costs, and increasing concern over the Food and Drug Administration's plan to re-examine the safety of Amgen's anemia drug. However, there were some positive developments in the fourth quarter which give ample scope for enthusiasm. In November, Amgen was honored with two 2009 Scrip Awards, winning for Best Overall Pipeline and for Best New Drug for Nplate?? (romiplostim). In December 2009, the company resolved EPO patent dispute with Roche. Amgen Inc is rumored to be planning to acquire the entire share capital of Savient Pharmaceuticals Inc, an East Brunswick-based pharmaceutical company.
In the last one year, the stock has shed more than 2%. Currently the share is trading at $56.25, compared to 52 week range of $44.96 and $64.76. As a result, the company's share is currently trading at a reasonable PE of 12.52. I expect the PE to expand to around 15.5, so it looks good to make creeping acquisition of the stock.
My optimism stems from two sources. First, Amgen's denosumab, a product that may stop tumors from spreading beyond soft tissue could be used to treat osteoporosis in aging women. This could be a potential $14 billion revenue generator by end 2014. Second, the company's board of directors has authorized repurchases of up to an additional $5 billion in Amgen common stock.
