Amgen Expected to Raise Guidance Even Higher

During its third-quarter conference call, Amgen forecast low 20% sales growth for its Epogen/Aranesp franchise through 2002. It also forecast mid-30% growth in 2002 for Neupogen and Neulasta, an increase from its previous guidance of mid-20% sales growth.

Most analysts see clear sailing ahead for Neulasta (the newer version of Neupogen) because it has zero competition. Aranesp's outlook is not as clear-cut, mainly because the drug is locked in a fierce market-share battle with Johnson & Johnson's(JNJ) Procrit/Eprex franchise.

As for Enbrel, Amgen management should provide an update on the drug's well-publicized supply constraint, including progress being made on getting a new manufacturing facility in Rhode Island approved by the Food and Drug Administration during the first quarter of 2003. Amgen has previously forecast 2003 Enbrel sales in the range of $1.2 billion to $1.4 billion. (An increase in Enbrel sales has less impact on Amgen's bottom line because of lower margins and royalties paid to Wyeth.)

Salomon Smith Barney biotech analyst Elise Wang believes Amgen will likely guide 2003 earnings to a range of $1.65 per share to $1.75 per share Thursday (She's raising her earnings projection to $1.70 from $1.66.) Wang believes Amgen gets to the higher number through lower operating expense and stronger drug sales, including 24% sales growth to $3.24 billion for the Epogen/Aranesp franchise and 27% sales growth to $2.33 billion for Neupogen/Neulasta.

"In our opinion, Amgen's fundamentals have never been stronger," Wang says. She rates Amgen outperform and her firm doesn't do banking for the company.

At its Tuesday closing price of $47.08, Amgen is trading at 28 times 2003 earnings, a tad over its 20% long-term growth rate. But ratchet up that growth rate to 25% and Amgen looks attractive compared with the rest of the profitable companies in the biotech sector.

Opines King, "I think Amgen trades at a pretty hefty discount to the group, and I don't think that's justified."

Amgen shares were down 3 cents to $47.05 in Wednesday pre-market trading.

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