There isn't a lot to complain about in Amgen's (Nasdaq: AMGN) third-quarter results.
The world's largest biotech posted impressive growth based in large part on a stable of drugs that help patients maintain red and white blood cell counts. As a biotech company, Amgen's specialization in a particular area is not unusual, and this portfolio will continue to serve it well. But the company is working to diversify, and success in this effort would be a major milestone in its ongoing maturation.
Amgen reported that third-quarter revenue jumped 16% to $3.2 billion, and net income arrived at $967 million, or $0.77 per share, compared with earnings of $236 million and EPS of $0.18 in 2004's third quarter. On an adjusted basis, a calculation that factors in the effect of non-cash and one-time items, Amgen's third-quarter earnings were $1.1 billion, up 27% from $839 million in the same period last year.
The Thousand Oaks, Calif.-based company has four drugs to thank for much of its sales and earnings. Neupogen and Neulasta help cancer patients undergoing chemotherapy maintain white blood cell counts. Aranesp is designed to increase red blood cell levels for patients undergoing chemotherapy or suffering from kidney disease. And Epogen is indicated for anemia in those with chronic renal failure undergoing dialysis.
Granted, these medicines cater to different patient groups, but their targeting of blood-related complications shows that Amgen remains fairly narrowly focused. Admittedly, Amgen has another big seller outside of this realm -- Enbrel, a treatment for rheumatoid arthritis and psoriasis -- but it shares rights to that medicine with Wyeth (NYSE: WYE).
Now Amgen is looking to take another step outside its traditional area of expertise. The firm has begun phase 3 trials for denosumab, a monoclonal antibody for osteoporosis. The National Osteoporosis Foundation estimates that osteoporosis is a health threat for 44 million Americans, and 10 million individuals in the U.S. have already come down with the disease. Thus, the drug would address a major market.
Results so far are promising. In a phase 2 study, twice-yearly injections of denosumab showed similar or greater efficacy in increasing bone mineral density to weekly dosing with Motley Fool Income Investor pick Merck's (NYSE: MRK) Fosamax, the leading osteoporosis medicine, which pulled $3.2 billion in revenue in 2004.
Amgen already has a great set of medications, but getting the osteoporosis drug on the market would make the company that much stronger. Investors should definitely focus on the results of denosumab's trials.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
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