Growing sales for its existing blockbusters combined with a promising pipeline of potential drugs should lead to standout performance for shares of Amgen (AMGN) in 2006, according to Citigroup analyst Elise Wang. "In our opinion, Amgen remains one of the most attractive large-cap health care growth stories," she says.

The stock is included on Citigroup's recently published list of top picks for the coming year.

Unlike large drugmakers, which excel at selling mass-market medicines for common ailments, biotech firms focus on unmet needs. Amgen's products treat illnesses such as anemia, rheumatoid arthritis and an immune-system condition in chemotherapy patients. Wang notes that Amgen has five multibillion-dollar drugs currently on the market, and it's hoping to expand some of these drugs for additional uses.

In late December, Amgen announced a $2.2-billion deal to acquire Abgenix, with whom it has been partnering to develop a potential new cancer therapy called panitumumab. "Amgen believes [panitumumab] could reach peak sales of $2 billion worldwide," Wang says. Also in Amgen's pipeline is a drug called denosumab (to treat osteoporosis and other conditions) as well as another cancer drug. Wang expects to hear more about the progress of these drugs in the months ahead.

In addition to its sales growth and product pipeline, Amgen sports a healthy balance sheet -- particularly notable in an industry where many companies are striving to turn a profit. That financial strength makes the stock all the more appealing in Wang's view.

Earnings increased 21% annually over the past five years, and analysts estimate 15% annual profit growth over the long term. Plus, Morningstar analyst Karen Andersen points out that Amgen generates ample cash, which it uses for acquisitions and for its aggressive share-repurchase program.

Despite Amgen's financial health, however, the potential for a trip-up remains. For example, analysts acknowledge that the shares could be hurt should the company have problems with a key drug in its pipeline.

At $79, the stock sells for 22 times the 2006 consensus earnings estimate of $3.64 per share. That's a higher price-earnings ratio than that of the S&P 500 but compares with a P/E of 51 for rival Genentech. Wang figures Amgen's stock can reach $100 over the next year.

--Lisa Dixon

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