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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week


September 11th 2009 Amgen
Nasdaq Symbol: AMGN
Industry: biotechnology
Price as of 9/11: $58.54

President Obama did his best to shake up the healthcare sector with his address to Congress on Wednesday. Most healthcare stocks actually improved the following day. Last week Barrons ran a positive piece on a biotech company which is the featured stock of the week, Amgen. Amgen is a leading human therapeutics company in the biotechnology industry serving millions of patients. The company is best known for psoriasis and arthritis drug, Enbrel although the company has a new bone-loss antibody that looks very promising. That's good news for Amgen because they do have drugs coming off patent eventually. The Enbrel drug comes off patent in 2012, but investors are acting like the drug is coming off patent next year. The Barrons article proposes that the stock is cheap, and with a possible final FDA approval as soon as next month for the bone-loss drug, denosumab that could give the stock a nice boost in the short term and the long term.
Back at the end of July, Amgen posted strong second quarter earnings. Amgen reported earnings of $1.27 billion or $1.29 per share, easily beating consensus estimates by 13 cents. Revenue fell 1% to $3.71 billion from $3.76 billion. A break down of Amgen's drugs went as follows,
their largest drug Enbrel saw sales of $899 million verse $901 million concensus. Neulasta sales were $831 million verse $875 million, first call. Aranesp came in at $693 million verse $668 million estimates. Epogen came in at $638 mln verse $605 million first call. Neupogen sales were $327 million verse $322 million. Going toward, Amgen issued upside guidance for 2009, seeing earnings estimates of $4.80-4.95 verse $4.57 consensus. Revenues for 2009 are trending towards the upper end of the current guidance range of $14.4-14.8 billion verse $14.33 billion consensus. The company said they are optimistic about their financial performance in 2009 and are focused on making the bone-less drug, denosumaba a success.
In the meantime, Amgen keeps churning out the profits. The stock trades for just 11.4 times earnings and 2.76 times book value of $21 a share. The stock has a high price to sales level of 4 times its $15 billion revenue which is common for a highly profitable firm. Many of the big technology blue chips also trade at high price to sales numbers. Most of the analysts on Wallstreet are in love with Amgen. Oppenheimer has a $70 price target. Bernstein Research has a $78 price target. RBC has a $72 price target and Citigroup has a $68 price target. That would translate into a nice 20% return from current levels. Not bad.