Somebody call the Foolish doctor!
Amgen (Nasdaq: AMGN) declined today on negative comments from Merrill Lynch, which downgraded the stock from "buy" to "accumulate," thereby solidly identifying itself as a Wise organization. How so? Well, after you learn how to "accumulate" without actually buying, please let us know the secret! (One argument is that current owners may accumulate the stock, but non-owners should not buy, thus the implied meaning of the downgrade. Even so, this logic is as flawed as a two-headed giraffe.)
Anyway, the concern surrounding Amgen is this: The company has been facing a lawsuit with Transkaryotic Therapies (TKT) for rights to Epogen, Amgen's $1.76 billion drug. Depending upon who you listen to, either Amgen or TKT clearly has the stronger case -- so, essentially, everyone is split 50-50 as to who will win in court.
Today, some people were concerned that Amgen could lose, while only yesterday an Amgen analyst wrote that she believed the company would win and the stock would react favorably. She even said that the verdict could be reached within two weeks if the judge decides to throw out the case. Most likely, however, the final outcome of the trial will not be known for a few years, because whatever the initial outcome, the losing party will appeal the decision. TKT is desperate to get a drug on the market, and it is currently aiming to get its own version of Epogen on the European market in 2001.
Of course, it is impossible to predict the outcome of a trial. (To see how convoluted this one sounds, you could read this confusing summary article.) However, we won't freak out about it. We'll merely continue to read about it and we'll watch the trial unfold (it certainly isn't a new development). Meanwhile, we'll also keep learning where Amgen's business is going. That is most important.
Amgen's Potential Drugs
Spending nearly $850 million on research and development (R&D) this year, Amgen spends more to discover and develop drugs than any other biotech. So far, the efforts have resulted in several new drug candidates. Amgen's pipeline (or drugs in the making) is impressive, if not mind-blowing.
In the table below, we summarize all of Amgen's drug candidates in their various stages of clinical trials. As you review the chart, realize that pre-clinical trials take one year to complete, on average. Next, getting a drug through phase I, II and III trials usually takes an average of ten years more (and that's assuming that a drug is a success). Following that, you can expect to wait one to two years longer for FDA approval before a drug finally hits the market and earns revenue.
Being a granddaddy in the biotech world, Amgen has an active and advanced drug pipeline. Keep in mind, however, that naturally some of the drug candidates shown below are merely offshoots of earlier drugs, and some are existing drugs in trials for use in different treatments. This doesn't reduce their importance, but it is important for context.
Product Pre- Phase Phase Phase FDA
Candidates Clinical I II III Approval
Stemgen-------------------------------------------------|
NESP
Dialysis------------------------------------|
Cancer---------------------|
Kineret---------------------------------------|
Abarelix
Prostate Cancer-----------------------------|
Endometriosis----------------------|
SD-01-----------------------------------------|
sTNF-R1-----------------------------------|
Calcimimetics-----------------------------|
Leptin------------------------------------|
OPG----------------------------------|
KGF----------------------------------|
BDNF---------------------------------|
Neuroimmunophilins-----------|
(Source: Motley Fool Research report.)
First is Stemgen, which has already been approved for some uses. However, Amgen and the FDA are in discussions about various trials, so the drug is in hiatus. Stemgen is a blood cell growth factor. Behind Stemgen, Amgen has four drugs in phase III trials, three other drugs approaching phase III trials, four drugs in phase II, and two drugs in phase I. Finally, although not shown, Amgen has several possible candidates in early pre-clinical trials.
Summarizing some of the drug candidates, NESP is a next-generation version of Epogen that can act longer inside the body, requiring fewer doses. Abarelix is a small molecule that inhibits hormones in relation to the pituitary gland. In relation to prostate cancer, Abarelix is hoped to clear phase III and FDA approval to launch in 2001. It could achieve $250 million in yearly sales. Kineret, in phase III, is an anti-inflammatory protein with potential to treat various forms of arthritis (meaning it will face significant competition). SD-01 is a new, longer duration version of Amgen's existing Neupogen drug. BDNF is in early stages of trials, but it has indications in treating Lou Gehrig's Disease.
All told, Amgen's pipeline has many promising candidates, and the company also has the market value and war chest to make good acquisitions. For a fancy 15-page analysis of Amgen that is presented Foolishly, consider the Amgen report sold by Fool Research. (You can get your $12 back if you're not happy with it.) Also, check out the Q&A on Amgen listed for free online in Fool Research. Amgen was one of the first companies to sign-up with Celera, and it has a genomics division. So, if you're interested in buying a biotech company but you shun extreme volatility, then Amgen, a Top Dog, may be your ticket.
Finally, today Celera (NYSE: CRA) published its map of the fruit fly genome. Celera believes that the results demonstrate greater than 99.99% accuracy, giving its "shotgun" approach to sequencing great credence. By the way, in the process of mapping the fruit fly, Celera found a "surprising number" of new genes that human beings share with insects. (Maybe that's why little boys love bugs so much?) In sum, this is amazing information to ponder. Certainly give the news a buzz.
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--Jeff Fischer, TMF Jeff on the boards
