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Subject: Effect, if any, of Medicare decision on Amgen

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Dave Forgianni

05/15/2007 10:03 AM
Hi, Amgen was recently dealt a blow from the Medicare program in regard to limits on payments for their anemia drugs in response to safety concerns. I've read a few articles on it as I know this is a fairly well-discussed company in our community. At first I thought "looks all bad I wonder if folks are selling off", then i read a few other articles that mentioned that a company of this size and reach (biggest in its industry if i recall correctly) can, and has in the past, weather storms similar, partly through r&d of new, yet to be announced drugs. This particular article went on to allude to buy possibilities as the stock price drops due to the recent Medicare news. I wonder are folks thinking this is a good time to drive your cost basis down and reload, or do you think this will effect Amgen in the long-term? Has anyone seen this company weather this type of news in the past and how long did it take, if so what effect did it have on say 2-4 year price/fundamentals? I sold it off in my 'pretend' club on the news, but i think if it goes under 50 maybe i should try it for a year. Whaddya think? Thanks! Dave

Patrick Landers

05/15/2007 9:38 PM
Hey Dave, I own some 'real' shares of AMGN and need to give it some more thought. VL's most recent report is favorable-it was printed before the 5-10 meeting you spoke of in your post, so the bad news had not been released. They were very impressed with the pipeline for AMGN. The number of late phase studies by the company as listed on their recent 10k gives one hope that better times are ahead. However, the drugs that were the subject of the 5-10 meeting make up >25% of revenues for the company, and there may be reimbursement problems for these drugs my Medicare, the biggest purchaser of them. Plus, there is a new competitor that will be available by late 07 or early 08. That all sounds like less revenue, lower margins and shrinking PEs. It may also lead to worsening inventories and accounts receivable. I updated my SSG and used 10% for future growth of sales and earnings. (Estimated high EPS $5.17) I also lowered the high PE to 20 and the low to 15. The stock is a buy at these prices with a rate of return of 14%. I too would appreciate anyone else's thoughts on AMGN. Pat Landers

Dave Forgianni

05/17/2007 3:26 PM
Hi Pat, Thanks for your thoughts. The stock is still very near or at its 52wk low, thus may present a buying opportunity if you are of the mindset that they can rebound through a) their gigantic size and b) the chance of new drugs in the pipeline. New article on Forbes though regarding FDA approval of a competitor's anemia drug that would cause me at least to hold off on a 'low' buy to see just how low it can go in the coming week or so: www.forbes.com/feeds/ap/2007/05/16/ap3729344.html If it goes under 50 i don't see how one couldn't take a shot at it, i mean did this (pending these) decision(s) cause a company of this size to lose +30 percent in value from its 52wk high of 77? Only time (with the aid of the FDA:) will tell! Dave

Erik Berg

06/28/2007 2:38 AM
http://www.peridotcapitalist.com/2007/05/amgen-dependance-on-aranesp-off-label.html

Dave Forgianni

06/28/2007 2:37 PM
Hi Erik and fellow AMGN followers, Thanks for the posting! According to my interpretation this article downplays the overall impact of any FDA label changes/warnings due to the percentages of overall sales. I think the jury will be out and the price will stagnate in the 55-60 range until Congress makes a decision, which is pending, according to another recent informative article found here. In reading this article it is important imo to understand each person quoted and their respective stake in the matter, as well as how any decision made by the elected members of congress would be viewed by their constituents. - 20070721 - I note the article linked to above has been removed. Recently I read somewhere congress will move on this specific issue in September. In searching the cnnmoney site for it though I found a more recent one regarding a congressional bill regarding biogenerics and their possible effect on the big pharma co's - it is found here. (at least for now!)

Patrick Landers

09/30/2007 8:13 PM
Dave, I am still holding my shares of AMGN-but not sure why. After reading the last 10Q report, which came out in 8-07, I felt like cashing out. The company said the a MAJORITY of patients receiving their ESA (Aransep) do not fit the current FDA guidelines (in a ruling from a meeting on 7-30) for usage (Hgb of 10 or lower). Since then, the US Congress has intervened and asked that the Medicare reconsider these changes in prescribing guidelines...Maybe the effects to Aransep sales will not be so severe. (Sales of Aransep decreased 19% THE LAST QTR.) There was also a push by the Nat'l Kidney Foundation to decrease the use of Epogen in anemia due to kidney disease that was also overturned. These 2 recent events may explain why the $ of the stock has gone up in September.

Dave Forgianni

10/05/2007 10:48 AM
Hi Patrick, I agree that in light of the recent company news regarding the anemia labeling and medicare rules (although i believe there was some positive news in september regarding congress but can't find the article), coupled with the planned layoffs of 15% (mostly r&d tmk) employees, AMGN could seem suspect. According to the folks at Decision Resouces in this article they (along with DNA) could also face heavy pressure from biogenerics in then next 5-10 years. Take Stock online and MI still regard it fairly well. I guess a couple of questions would be can management fade congress and the competition. Do you know if they have faced this kind of pressure in the past in regard to congress, or a big drug not getting approved etc? I assume they've always had relatively stiff competition thus will find a way to compete. Strictly by the numbers looks like they've handled whatever came up in the past (again i don't know if anything of this scale) relatively well. I guess the next question might be what would you consider replacing it with? TEVA maybe? dave

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