Amgen, Inc.’s (AMGN) results over the past few quarters demonstrate the challenging, but stabilizing ESA market. Nevertheless, we still feel as though the pipeline is significantly undervalued, and we continue to recommend the name as a long-term Hold within the biotechnology sector.

Recent positive news on phase III denosumab is a big reason we continue to be positive on Amgen. The ESA trends are stabilizing, but it will still take a few more quarters to see exactly how the ODAC meeting and finalized label will affect sales. In the meantime, investors should focus their time on just how big denosumab and motesanib can be, because they are the next wave of potential growth.

Amgen is still an enormously profitable company generating significant cash flow over $1.5 billion in the second quarter alone. Our DCF analysis shows fair value in the mid $60s.

The stock had a huge run-up after the pivotal phase III denosumab data and the solid second quarter earnings. We do not believe the big run continues, and thus are not yet ready to upgrade the shares.

Amgen’s earnings have a tendency to bounce between quarters, significantly beating one quarter and then disappointing the next. We see fair value at $66 or 14x our forward twelve month 2008 EPS of $4.42. We see 2008 EPS at $4.37, in-line with the management’s updated guidance of $4.25 to $4.45.

Read the full analyst report on AMGN

“AMGN” Free Stock Analysis: Buy? Sell? Hold?
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