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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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 SP 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
-
The Stoic Retirement: Ancient Wisdom for Today's RealityA "Stoic retirement" doesn't mean depriving yourself. It's a character-based approach to life and aging that can bring calm and clarity.
-
My Teen Crashed His Car and Now Our Insurance Has Tripled. What Now?Dealing with the costly aftermath of a teen car accident is stressful. Here are your options for navigating it.
-
11 Outrageous Ways To Spend Money in RetirementWhether you have excess cash to spend or want to pretend, here’s a look at 11 ridiculous ways retirees can splurge.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
Dow Climbs 559 Points to Hit a New High: Stock Market TodayThe rotation out of tech stocks resumed Tuesday, with buying seen in more defensive corners of the market.
-
Stocks Rally as Investors Buy the Dip: Stock Market TodayMost sectors are "go" only a day after talk of bubbles, extended valuations and narrow breadth undermined any kind of exuberance.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
-
What the Rich Know About Investing That You Don'tPeople like Warren Buffett become people like Warren Buffett by following basic rules and being disciplined. Here's how to accumulate real wealth.
-
S&P 500 Sees New Highs on Shutdown Day: Stock Market TodayMost of its components were in the red, but the S&P 500 Index still managed to hit a new intraday all-time high.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have TodayBank of America stock has been a massive buy-and-hold bust.
