NEW YORK – Wall Street is confident Amgen Inc will win approval for its lead experimental medicine, the osteoporosis drug denosumab, but questions remain about the drug's sales potential.
Shares of Amgen, which have been beaten down over its weakened anemia franchise, jumped 13 percent on Monday after the biotechnology company said late on Friday that denosumab significantly reduced the risk of bone fracture in post-menopausal women in a large late-stage study.
The positive clinical results arrived ahead of Amgen's second-quarter results, which is expected after the market closes on Monday. Analysts project profit, excluding special items, to fall slightly from a year ago on lower revenue of $3.58 billion, according to Reuters Estimates.
Amgen shares have risen 31 percent this year, but are still far from the $80 range they traded at in early 2006, as the stock has been battered by safety concerns surrounding its top anemia drugs.
Before Friday's news, Amgen shares had been far undervalued compared to its peers, Thomas Weisel Partners analyst Ian Somaiya said, with its shares trading at 11 to 12 times 2009 earnings forecasts compared to a group multiple of 20 to 21.
“I think it's simply a case of: 'Does this stock deserve this level of discount relative to the rest of the large cap biotech space?' “ Somaiya said. “And the answer today is 'No.'”
Somaiya was one of at least three analysts – along with those at Morgan Stanley and Jefferies & Co – to raise their ratings on Amgen stock after Friday's announcement.
JPMorgan analyst Geoffrey Meacham said Friday's news was a clear positive for Amgen, suggesting a high probability that the drug will win approval.
But full data from the study will not be released until a medical conference in September. Until then, it is unclear how denosumab's potential benefit in reducing fractures stacks up in comparison to existing drugs, Meacham said.
“We would not rush to put new money into Amgen shares, as (denosumab) estimates are already large, and uncertainty remains on the true clinical benefit,” Meacham, who kept his ”neutral” rating on the shares, said in a research note.
Chris Raymond, an analyst with Robert W. Baird, said that Novartis AG's Reclast, a once-yearly infusion, has demonstrated strong data and “raised efficacy standards in this therapeutic category.”
Amgen also said on Friday that the rates of side effects, including serious infections, for those on denosumab were similar to those taking a placebo in the trial, relieving analyst worries that safety issues might scuttle the drug.
JPMorgan's Meacham said Amgen's ultimate regulatory package for denosumab should still include data from smaller studies that showed signals of serious infections, which could be included in the drug's eventual warning label.
(Editing by Derek Caney)
