Amgen Inc

							By: Tony Huang
   Pioneered the development of novel products
    based on recombinant DNA and molecular biology

   Does not have much competition due to focus on
    serious diseases that lack current treatments

   Largest independent biotech firm with market cap
    of $47.49B

   One of the oldest biotech firm, established in 1980

   Main drug focus: anemia, arthritis, cancer
   Nephrology (kidney disease)
    ◦ Epogen, Aranesp, Sensibar

   Oncology
    ◦ Neupogen, Neulasta, Aranesp, Vectibex,

   Immunology
    ◦ Nplate, Enbrel, Denosumab (Prolia, Xgeva)*
   *Feb 22, The Journal of Clinical Oncology Publishes Phase 3
    XGEVA(TM) (Denosumab) Results

   Feb 18, FDA’s rules for copying biologics coming soon, TEVA
    to file competition with Neupogen

   Feb 16, Medicare predraft to dampen usage of anemia drugs

   *Jan 24, Amgen to Acquire BioVex, a Privately Held
    Biotechnology Company Headquartered in Woburn, Mass

   Jan 24, Amgen release 4Q results, outlook for 2011 below
    analyst estimates
   Latest drug approved by FDA, targets the osteoporosis
    market, worth roughly $10 billion
   Prolia, which treats postmenopausal osteoporosis, was
    approved on June 2, 2010
   Xgeva, which prevents skeletal-related events in patients
    with bone metastases, was approved in November, 2010
   Both drugs have generated a combined$41 million in
    revenue during 2010
   Working with GSK and other pharma companies to
    distribute in emerging markets such as China, SK, India
   Expect accelerated growth in 2011
   Feb 22, Xgeva results show non-inferiority to Zometa
    (Novartis), but not statistically significant superiority
   Amgen will pay up to 1 billion to acquire BioVex.
    $425 million in cash at closing and the rest upon
    successful milestones.

   OncoVex, the star drug of BioVex, is in Phase 3
    clinical trial and has shown great promise in
    treatment of melanoma, head and neck cancer

   Significant amount of complete remission observed
    in Phase 2 trials. Very benign side effects so far.

   Amgen expects to put OncoVex in the market in
    next few years. Potential to be a huge blockbuster
• Biotech has not seen too much growth for the past year
• Amgen has not experienced recent Biotech growth over the
  last 6 months
• Very healthy profit margins, especially for such
  a big firm
• Slight decreases in ROA, ROE, and ROI
• Is Amgen going to
  continue stagnating?
  NO

• Anemia drugs, which
  account for over a third
  of the company’s
  revenue, is slowly
  declining

• New products with lots
  of potential does not
  have volume to cover
  up loss

• Nplate growing rapidly,
  Denosumab could be a
  blockbuster

• Look beyond 2011,
  Amgen has great
  potential.
           Total Drug Sales
         1.96%1.56% 0.28%
 4.87%
                                                    Aranesp
                       16.96%                       Epogen
                                                    Neulasta
                                                    Neupogen
24.11%
                                                    Enbrel
                                17.22%
                                                    Sensipar
                                                    Vectibix
   8.77%                                            Nplate

                 24.27%                             D-mab




  US Sales vs International
                   Sales

                                    US Sales
           23%

                 77%                International
                                    Sales
• Cash flow growth negative for 2010 , mainly due to lack of
  revenue growth and a 25% increase in CF from Investing Activities
• Reductions in CapEx has helped free cash flow growth. Expected
  to stay the same in 2011
   Feb. 17, Europe’s largest biotech firm
    Actelion paid its first dividend, $0.83 francs
   Amgen has huge cash reserves, $17.4billion
   Has been under pressure from investors to
    tap into its cash reserves
   Pressure from slowing growth, especially in
    revenue
   Analysts estimate 50% chance that Amgen will
    issue dividend in 2011 and 90% in 2012
   Better to look at specific drug markets

   Anemia drug, Aranesp, competes with Johnson &
    Johnson’s Procrit

   Arthritis drug, Enbrel, competes with Abbott Labs’
    Humira, Johnson & Johnson’s Remicade, and Pfizer’s
    Celebrex

   Epogen, Neupogen, and Neulasta do not have direct
    competitors

   Osteoporosis drug, Denosumab, competes directly
    with Novartis’ Zometa and Merck’s Fosamax
• Competes with all the big dogs
• Beating them on almost all fronts
• Current ratio (not shown), is 3.52, competitors
  range from 1.0-1.6
• No dividend, but this just shows more reason why
  they should issue one soon
• Competitors haven’t been doing too well
• Competitors don’t really have big impact on Amgen
• Proves Amgen’s ability to break into relatively untapped markets
  and retain market share.
   Analyst at ISI group destroyed a base-case
    scenario for Amgen

   Lowered estimates for every drug sales

   Assumed none of the pipeline would work out

   Gave D-mab a very modest estimate in
    growth

   Still arrived at $50/share
   Advantages:
    ◦ Underpriced, great technical indications
    ◦ Very possible dividend payout soon
    ◦ Great fundamentals and future prospects with
      robust pipeline and two potential blockbusters

   Disadvantages:
    ◦ Disappointing growth estimates for 2011
    ◦ Regulations and competition weighs on existing
      products
    ◦ Denosumab “may” underwhelm

   Final Recommendation: BUY