Here's a fitting cheer that's appropriate for the proposed merger between


(AMGN) - Get Report



: "Can we do it? Yes, we can!" Famous words from Bob the Builder (those of you with young children will know what I'm talking about).

There was so much news and information surrounding the recent announcement that Amgen was planning to acquire Immunex that it had investors' heads spinning. But it should be expected when you have the potential for what could be the largest biotech acquisition ever.

When the initial news leaked out on the merger, Amgen's share price fell while Immunex's went up. Speculation was running amok on the deal, with investors being extremely worried about Amgen's ability to sustain its earnings growth, especially becasuse not too long ago, Amgen indicated that it expects to grow 20% annually.

After the announcement, though, both companies' share prices rose as investors gave approval to the union. Since then, both stocks have pulled back, and based on how prices have been moving the past few days, investors don't appear too enthused about the deal.

Yes, Amgen is paying a pretty penny to acquire Immunex -- $16 billion in cash and stock. But in my opinion, the dowry that Immunex will bring to Amgen is worth it. Instead of a low-20% growth rate, Amgen has now raised its estimates to the high 20% range. If you recall an

article I wrote in November on the companies, based on valuation Amgen is more attractive. And after chewing the fat and digesting Amgen's conference call, I still advocate buying Amgen.

The success of this deal will rely heavily on the management skills of both companies and their ability to execute. Luckily, both companies have strong teams in place. Their track records have shown that management has communicated with investors reliably. They set milestones, and if something goes awry, investors are informed. Overall, both Amgen and Immunex have proven they are companies that let investors know where they stand, what's coming up and what impact new developments will have on the corporation as a whole.

Wall Street probably would be more upbeat about this marriage if Immunex didn't have manufacturing constraints with Enbrel, which have hampered sales. To resolve the issue, Immunex is building more manufacturing plants. Unfortunately, this takes time. There are probably logistical issues to doing this, but if Amgen could ease the Enbrel manufacturing supply problems with its own plants, I bet Wall Street analysts would give its blessing instead of downgrading both companies.

Thus, with two key drugs, Immunex's Enbrel for the treatment of rheumatoid arthritis, and its own Aranesp to help stimulate the production of red-blood cells for dialysis patients, Amgen should continue to report outstanding revenue growth. More importantly, Amgen will have consolidated a strong franchise for treating patients with rheumatoid arthritis. Enbrel is the first-line treatment for rheumatoid arthritis, and if that doesn't work, patients can try the second-line defense drug, Amgen's own Kineret.

Then, there is the gravy -- additional sales. Immunex is waiting for Enbrel to be approved by the Food and Drug Administration for treating patients who have psoriatic arthritis, an untapped market that will generate lucrative profits. Amgen also is waiting for approval to expand the labeling for Aranesp to treat cancer patients in need of blood products to combat anemia. If Aranesp receives FDA approval, Amgen will mark additional revenue.

In all, then, combining the two companies is a good move for building future growth.

Nadine Wong is the editor, publisher and co-founder of the

BioTech Sage Report

and contributes a weekly biotech column to this site. At the time of publication, Wong had positions in Amgen and Immunex, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While she cannot provide investment advice or recommendations, Wong invites you to send comments on her column to

Nadine Wong.

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