Amgen Needs a Break

During the call, however, the analysts were paying attention to misses in clinical trials. Preliminary 12-week data from a phase III study in colon cancer showed that patients who took Vectibix in conjunction with chemotherapy and Genentech's (DNA) Avastin fared no better than those treated with just chemo and Avastin.

Additionally, there were more adverse events among patients taking the Vectibix combination. Amgen also decided to postpone a phase III trial for Vectibix in cancer of the head and neck.

An Aranesp trial in patients with cancer-caused anemia didn't go well either. There was a statistically significant increase in deaths among patients taking Aranesp, and the drug did not show any greater efficacy. It's important to note that the trial studied a small set of gravely ill patients. Nevertheless, that's not good news.

While stocks eventually trade to their fundamentals (usually), it sometimes takes a while. Sentiment is what often moves shares. Right now, the Street appears disappointed with Amgen due to the pipeline data. I believe it's likely Amgen shares will head lower and remain in a funk until the Cera issue is settled.

But there are a few on the Street, such as Bear Stearns analyst Mark Schoenebaum, who believe that Amgen has a better than 50/50 chance of keeping Cera off the market and protecting a $6.5 billion franchise.

If that's the case, I believe investors will quickly forget about last night's disappointment and euphoria will reign. They'll realize that 16 times 2007 earnings and 1.2 times growth (at current prices) is cheap -- especially for a company with a proven track record and a new drug that, despite the latest setbacks, still has enormous potential.

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