2006 has been a good year for those who have invested in the S&P 500: The index has been up more than 10% thus far. Investors in large-cap biopharmaceuticals haven't been nearly so happy, though, as shares of the top two biotech giants, Amgen (NASDAQ:AMGN) and Genentech (NYSE:DNA), have been down this year. Let's take a look at how 2006 treated Amgen and, hopefully, see why its shares have not performed well.

Amgen started the first quarter of 2006 by announcing huge increases in research and development and manufacturing spending, totaling more than $1 billion in the coming years. Even with a 20% increase in R&D spending during the quarter, net income was still up 19%, and earnings per share grew even more to $0.91 on the back of 14% revenue growth and reduced taxes.

The first quarter also brought important progress in the clinic as Amgen started the first of four pivotal phase 3 trials for the oncology drug denosumab, which it received in its $2.2 billion buyout of Abgenix last year. Denosumab is very important to Amgen, as it's the latest-stage drug that has the most potential to be its next billion-dollar drug.

The second quarter was marked by numerous positive clinical trial results for Amgen. Nearly all of its most important drug candidates produced good trial results. Positive phase 2 data was released on denosumab, and the company also saw solid phase 3 trial results for Vectibix (the other important Abgenix cancer drug). The FDA granted Vectibix a priority review, as well.

On the financial side of things, sales of Amgen's anemia drug Aranesp surpassed the company's flagship Epogen, and overall product sales grew 14%. This led to 11% growth in net income, which was held back once again because of double-digit increases in R&D and SG&A spending.

The highlight of Amgen's third quarter was the FDA's approval to market the company's colorectal cancer drug, Vectibix. It will compete directly with ImClone Systems' (NASDAQ:IMCL) Erbitux, although the market is big enough for both monoclonal antibodies; ImClone's marketing partner, Bristol-Myers Squibb (NYSE:BMY), produced nearly $500 million in Erbitux sales in just the U.S. alone for the first nine months of the year.

The fourth quarter has been extremely quiet for Amgen thus far, with no important clinical trial results made public and no quarterly earnings results announced until next year. In the last quarter, earnings guidance was in the range of $3.85 to $3.95 per share (excluding stock options), which brings the earnings range for the fourth quarter to $0.85-$0.95 per share, up at least 13% compared with the $0.75 earned in last year's fourth quarter.

Net income is expected to see a steady rise in 2006 vs. 2005, and the stock is down for the year. This means that shares of Amgen have gotten cheaper in 2006. Based on this fact, and for several other smart reasons, it was nominated as the best blue chip for 2007 by Fool biotech analyst Karl Thiel.

Here's how our Motley Fool CAPS community rates Amgen as a potential investment. It has a solid four out of five stars and one of the highest bull-to-bear ratios (18 to 1). Additionally, nearly 100 of these Amgen bulls are CAPS all-stars.


CAPS Rating ****

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CAPS member gstrout does an excellent job summing up Amgen with this pitch: "Proven ability to bring innovative therapies to market, solid financials, several strong revenue generating therapies in the market, a deep pipeline, heavy R&D spending, 3-4 mid-to-late stage products with good potential, and a price drop thanks to market gravity."

For investors in shares of Amgen, it hasn't been a good year. The stock has been down more than 7% year to date. Despite this fact, Amgen has had successes on all fronts this year, including in the clinic, with the FDA and other regulatory authorities, and in marketing its drugs. If Amgen can continue with these successes, 2007 should be a better year than 2006 has been for shareholders, and the increased R&D spending that was started this year should produce results down the road for patient investors (and hopefully come down, as drugs like denosumab eventually wind down phase 3 testing).

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Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .