AMGEN RESURGENT IN OCTOBER: PIPELINE AND BIOTECH IMAGE WIN WALL STREET FAVOR

Executive Summary

Amgen's product pipeline is creating a Wall Street consensus in support of the stock as it rings notice of its renewed status as the biotechnology bellwether. In October trading, Amgen led a hot biotech sector with a 7-point gain, closing the month up 18% to 45-5/8. Three Phase II products -- consensus interferon, stem cell factor and brain-derived neurotrophic factor -- have been cited widely as potential winners for Amgen. Investors are expecting progress reports on all three at medical meetings during the last two months of the year. After losing more than half its value in the first seven months of the year due to concerns about its ability to maintain earnings growth in the face of market pressures facing the whole pharmaceutical industry, Amgen has recovered over 10 points in the past three months. Investors have begun once again to value Amgen in biotechnology terms, with pipeline potential replacing near- term earnings as the focus of analysts' attempts to value the stock. Amgen helped recast the financial community's impression of the company at a Sept. 23 analysts meeting. The company assuaged lingering concern about near-term earnings by stating that it is "comfortable" with Wall Street projections for the year. As evidence that the bloom is literally back on Amgen, the comments of one analyst, Dillon Read's Lawrence Bloom, recalls the enthusiasm of previous biotech rallies in the past. Reports of mouse studies by Amgen's partner Regeneron employing a combination of BDNF and ciliary neurotrophic factor led Bloom to conclude that BDNF Phase III trials will be done in combination with CNTF, resulting in "fast track" approval by 1996 for BDNF. "We expect eventual sales of BDNF to be larger than Epogen or Neupogen," Bloom wrote. Amgen's fortunes were also helped by recent changes to tax laws. While Amgen Chairman Gordon Binder has been prominent in forecasting dire consequences to the biotechnology industry as a result of President Clinton's health reform plan, investors saw a tangible benefit from the recent budget bill: the company reported a one-time gain of $9.6 mil. due to reinstatement of the R&D and orphan drug tax credits in its third quarter results. The recovery of Amgen is indicative of a broader recovery in the biotech sector. The pharmaceutical component of the "F-D-C" index of 0-T-C traded stocks posted a 9.5% gain for its third consecutive monthly increase. Biotech stocks improved across the board. The generic sector also continued to be red hot, fueled by Hoechst's bid to acquire Copley (up 1-3/4 to 48). Zenith continues to be the favorite takeover play, as the stock gained another 10 points in October to close the month at 80. Should the recuperation continue, the biotech industry could see a new round of public financings in the near future.