Amgen's (Nasdaq: AMGN ) glass is half-full, but the market continues to think it is half-empty. That best explains why the biotech giant's share price lingers in the doldrums. Nearly 25% off its 52-week high and set for solid Q2 results (scheduled for release July 22), Amgen spells opportunity for investors.
Investors worry about Amgen's reliance on just a handful of drugs for sales. Two blockbusters, anemia treatments Epogen and Aranesp, account for almost half of Amgen's sales. Another concern: Medicare regulators are in the process of making changes to the way the system covers cancer-supporting drugs like Amgen's. More limited reimbursement policies could curtail the use of drugs beginning in 2005.
Still, there are positive signs ahead. Despite suffering a blow during the quarter when an experimental Parkinson's disease drug failed a midstage study, the company has two more drugs in late-stage clinical trials and 16 other candidates in midstage trials.
If just a portion of those pipeline products works out, Amgen could give big pharma players Merck (NYSE: MRK ) and Eli Lilly (NYSE: LLY ) a serious run for their money. Indeed, that's the big idea: Amgen is making the move from a narrow biotech into a diversified pharma company that discovers, produces, and markets big-selling drugs.
One of the few biotech companies to generate consistent profits, Amgen trades at just 20 times estimated 2004 earnings, and those earnings are projected to grow at 20% over the next three to five years. If Amgen falls much lower, investors should think seriously about buying in.
Amgen competitor Merck is aMotley Fool Income Investorrecommendation. To learn more, sign up for a free 30-day trial.
Fool contributorBen McCluredoes not own shares of any of the companies mentioned.