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.
Sign up for Kiplinger’s Free E-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
-
What Not to Do When Planning Your RetirementCommitting any of these four common mistakes can set you back in your golden years. Here's how to increase your chances of a successful retirement.
-
2024 Thanksgiving Meal Cost: Grocery Taxes and Your Food BudgetFood Prices Some families are navigating high food prices influencing what’s on the table this Thanksgiving.
-
Stock Market Today: Stocks Drop as Post-Election Party EndsIt was a red finish on Wall Street Friday with tech stocks selling off ahead of Nvidia's upcoming earnings event.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
Fed Cuts Rates Again: What the Experts Are SayingFederal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
-
Fed Goes Big With First Rate Cut: What the Experts Are Saying
Federal Reserve A slowing labor market prompted the Fed to start with a jumbo-sized reduction to borrowing costs.
-
Stock Market Today: Stocks Retreat Ahead of Nvidia EarningsMarkets lost ground on light volume Wednesday as traders keyed on AI bellwether Nvidia earnings after the close.
-
Stock Market Today: Stocks Edge Higher With Nvidia Earnings in FocusNvidia stock gained ground ahead of tomorrow's after-the-close earnings event, while Super Micro Computer got hit by a short seller report.
-
Stock Market Today: Dow Hits New Record Closing HighThe Nasdaq Composite and S&P 500 finished in the red as semiconductor stocks struggled.
