Lehman Brothers

analyst David Gruber upgraded

Johnson & Johnson

(JNJ) - Get Report

to buy from market perform, telling investors the drug company's cancer fighting blockbuster drug, Procrit, is in good shape against second-generation rivals like

Amgen's

(AMGN) - Get Report

NESP.

The companies are engaged in a battle to get a new anemia drug into the marketplace to capitalize on Procrit's success. The drugs are used to combat the crippling anemia many radiation and chemotherapy patients become stricken with.

Gruber's upgrade is nothing more than a valuation call. He cited no change to fundamentals and expressed concern about J&J's new product pipeline. Gruber upped his rating and sales targets for Procrit because approval for NESP has been delayed. "Current valuation

is below historical premium to the

S&P 500

and

at a discount to the pharmaceutical index," he wrote in a research note this morning. He raised his price target to $110.

Johnson & Johnson closed yesterday at $100.32, giving it a price to earnings ratio of 28.5. That's just below the S&P 500's current P/E and well below the 34.47 average of the industry.

This has been a wild year for the blue-chip drugmaker, and the drug industry as a whole. In 2001, Johnson & Johnson has traded as low as $80.50 and as high as $104.68.

Johnson & Johnson holds a meeting with analysts on May 30.