Amgen's Anything but Anemic

While there's no doubt that Amgen's(AMGN Quote) lead products, which include Epogen to treat anemia and Neupogen to treat infections, have been performing well, shareholders and analysts have been left with a bit of a void. That's because a key product in its pipeline, Aranesp, had taken about three months longer than expected to receive approval by the Food and Drug Administration.

But on Tuesday, the second-generation anemia drug finally got the nod from the FDA, and in the coming weeks I expect the sell side to reflect this approval in its earnings estimates.

But even without this blockbuster product, Amgen looks to be in pretty good shape. On Aug. 16, an FDA panel recommended its rheumatoid arthritis drug, Kineret, for approval. Although this product is not expected to be as big a hit as Aranesp because Immunex(IMNX Quote) and Johnson & Johnson(JNJ Quote) have a competitive offering on the market, it should serve as a sign that the company is effectively broadening its pipeline and is focused on developing as many revenue streams as possible.

Yet another positive is Amgen's balance sheet. With $2.4 billion in cash and marketable securities, and only about $223 million in long-term debt, the company appears to have the flexibility to build out its pipeline and drive existing drug sales without the need to tap the equity markets. That's a good thing.

Thomson Financial/First Call estimates have Amgen earning $1.18 a share in 2001 and $1.40 a share in 2002. But given the recent approval for Aranesp in both Europe and the U.S., I believe these estimates will prove to be conservative.

Based on current expectations, the average price target for the stock is $83 -- implying about 30% upside from current levels. But after speaking with at least one sell-side analyst who has yet to revise his earnings model, the feeling is that the stock could, given the improving fundamentals, realistically trade north of $90 within the next 12 months.