Amgen

(AMGN) - Get Report

wants back into the biotech growth club, and with its experimental bone drug denosumab, the biotech company may have finally found its golden ticket.

Late Friday, Amgen announced that denosumab reduced the risk of spine and hip fractures compared to placebo in a large phase III study of postmenopausal women with osteoporosis.

The success of the denosumab study is welcome news for Amgen after 18 months of woes tied to falling sales of its anemia drugs. Denosumab has the potential to generate several billion dollars in sales for Amgen, which is desperate for a new blockbuster drug to jack up top- and bottom-line growth.

News of the positive denosumab study, released after the market close Friday, sent Amgen shares up 15% to more than $61 in after-hours trading.

Amgen is the largest biotech company in the world measured by total revenue, but the stock spent most of the past year and half in Wall Street's doghouse because of shrinking revenue and earnings. Investors demand growth -- and lots of it -- from profitable biotech firms in order to justify premium valuation multiples.

Yet Amgen is expected to post a 2% decline in both earnings and revenue this year, with single-digit growth forecast for 2009. Accordingly, Amgen's stock price slid from $70 in at the start of 2007 (when troubles with the anemia drug franchise began to emerge) to a low of around $40 earlier this year. At the same time, the company's price-to-earnings multiple shrank from the mid-teens to below 10.

On that basis, Amgen was no longer considered a member in good standing of Wall Street's biotech club, as investors flocked to stocks like

Celgene

(CELG) - Get Report

,

Biogen Idec

(BIIB) - Get Report

,

Genentech

(DNA)

and

Gilead Sciences

(GILD) - Get Report

instead.

In fact, at times, Amgen had a hard time competing with Big Pharma stocks like

Schering-Plough

(SGP)

,

Bristol-Myers Squibb

(BMY) - Get Report

and

Pfizer

(PFE) - Get Report

.

This is why denosumab is so important to Amgen's future. Crucial details of the drug's performance won't be made public until a medical meeting in September, but if denosumab -- an injection administered twice a year -- can reduce spine and hip fractures by 50% or more, the drug will likely make a big dent in the $8 billion global osteoporosis market even though it will be more expensive than generic osteoporosis pills.

Such a success could spark an expansion of Amgen's multiple back into the mid-teens, returning the company to the biotech fold.

The Amgen renaissance has already started, in fact. Shares are up more than 40% since mid-June. At $61 a share, Amgen trades at 13 times the Street's 2009 earnings estimate of $4.45 a share.

At that multiple or higher and with denosumab contributing to an improved growth picture starting in 2010, Amgen could easily trade in the mid-$60s to low-$70s even if current earnings estimates remain unchanged.

Adam Feuerstein writes regularly for TheStreet.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;

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