Amgen Feels More Pain

The "Aranesp-Cera" overhang on Amgen has now turned into the "Aranesp safety" overhang.

On the positive side, all the reasons to like Amgen as an investment, including those mentioned above, remain. And the stock is cheap, trading at 15 times the consensus EPS estimate for the current year. If Aranesp's proves to be safe, this episode will be viewed in hindsight as a tremendous buying opportunity.

How will we know if Aranesp is OK? Patience, I guess. Monthly sales reports will be scrutinized for any significant changes in prescription trends. And with some big cancer conferences coming up, including the American Society of Clinical Oncology's annual meeting in June, you can bet that Wall Street will be grilling influential doctors about their thoughts on the drug.

One thing Amgen must do is stay on top of this situation and be proactive about disclosing any new information to investors. The company screwed up by keeping silent about the Danish study, something CEO Kevin Sharer acknowledged on Friday afternoon's conference call. There are four other long-term Aranesp studies that should yield important data on the drug and its risk-benefit in treating cancer patients. When new data is available from these studies, Amgen must disclose them immediately.

Heck, if Susie Q. High School is doing an Aranesp study for the science fair, Amgen better know about it. The drug is under a high-powered microscope, so if Amgen doesn't disclose first, someone else surely will.

For those who may have missed Friday's events, here's a recap:

At issue is a relatively large, randomized and controlled Danish study designed to determine whether the use of Amgen's Aranesp would have a beneficial effect on head-and-neck cancer patients undergoing radiation therapy. Simply put, if patients got Aranesp to raise their hemoglobin levels, it would make tumors more sensitive to radiation.

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Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.