Soft earnings aside, news of several setbacks in Amgen's ( AMGN) drug pipeline was what did the most damage to the biotech company's stock in late trading.

Nevertheless, I wouldn't be surprised to see the shares, which slipped 3% to $72.60 in after-hours trading, break the $90 level if the overhang from its anemia drug litigation is removed sometime this year.

Amgen is currently in the court system arguing that Roche's Cera infringes on Amgen's patent for anemia drugs Epogen and Aranesp. Cera is expected to enter the market midyear. On its conference call Thursday, Amgen management said that even if Cera is launched, it wouldn't be a big factor financially in 2007.

I'm not sure all of Wall Street agrees, because Amgen's stock has been in a rut for well over a year.

On the call, analysts spent very little time focused on the solid revenue performance. Amgen's largest revenue driver, Aranesp, grew sales 27% in the fourth quarter vs. an increase of 24% in the year-ago period.

Epogen experienced growth of 10%, after a decline of 10% last year. Sales of its Enbrel arthritis drug climbed 18% vs. 19% growth last year.

Only Neulasta showed significantly slower growth: 10% compared with 22% in the fourth quarter of 2005.

Management said that all but 2% of revenue growth was due to demand. Even its newly launched Vectibix cancer drug scored well with sales of $39 million. Earlier in the week, I projected that a $40 million figure would be indicative of a strong launch. Management said Vectibix captured 20% market share in the less than three months it's been available.

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.
In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.

Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86, 87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback; click here to send him an email.

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