Analyst: Victor Sula, Ph.D.

Initial Report
January 9th, 2008

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volume © BigCharts.com
Amgen Inc.
30
One Amgen Center Drive

Millions
Thousand Oaks, CA 20

91320-1799 10

0
Phone: +1 805-447-1000 Nov Dec 09
Fax: +1 805-447-1010
Website: www.amgen.com
MARKET DATA

Share Statistics NASDAQ 9m 9m

(12/23/08) 2006 2007 %Chg 2007 2008 %Chg
Symbol AMGN Revenues, $ Mn. 13,858 14,311 3.3% 11,026 11,252 2.0%
Current price $57.93 Gross margin 85.3% 82.8% -2.5 b.p. 82.4% 84.5% 2.1 b.p.
Low/ High 52 weeks $39.16 - 66.51 Operating margin 26.9% 26.9% 0.0 b.p. 26.5% 36.2% 9.7 b.p.
Average Volume 6,040,625 Net margin 20.7% 21.4% 0.7 b.p. 21.1% 28.8% 7.7 b.p.
Market Capitalization $22.014 Bn
Shares Outstanding 1,059 Mn EPS, $ 3.51 3.86 10.0% 2.05 3.00 46.3%

Source: Yahoo Finance, Analyst Estimates

Background
Amgen Inc. (AMGN, the Company) is a global biotechnology company en-
gaged in the discovery, development, manufacture and commercialization
of human therapeutics based on advances in cellular and molecular biology.
The Company has research programs in metabolic disorders and osteoporo-
sis, inflammation, oncology, neuroscience and hematology. AMGN is consid-
ered to be the largest independent biotechnology company in the U.S., and
the only business that succeeded to transform itself from a drug development
company into a pharmaceutical manufacturer with solid sales.

The Company’s principal products include: Aranesp (darbepoetin alfa) and

EPOGEN (Epoetin alfa), which stimulate the production of red blood cells
to treat anemia and belong to a class of drugs referred to as erythropoiesis-
stimulating agents (ESAs); Neulasta (pegfilgrastim) and NEUPOGEN (Fil-
grastim), which selectively stimulate the production of neutrophils, a type
of white blood cell that helps the body fight infections; and ENBREL (etan-
ercept) that blocks the biologic activity of tumor necrosis factor by inhibiting
Amgen Inc. (NASDAQ: AMGN) 1
 Analyst: Victor Sula, Ph.D.
Initial Report
January 9th, 2008

TNF, a substance induced in response to inflammatory and immunological responses, such as rheumatoid ar-
thritis and psoriasis. Other marketed products include Sensipar, Nplate and Vectibix.

The Company’s research facilities are located in California, Massachusetts, Washington, Canada and Germany.
AMGN operates manufacturing facilities in California, Colorado, Rhode Island, Washington and Puerto Rico. It
markets its products to healthcare providers including physicians or their clinics, dialysis centers, hospitals and
pharmacies primarily in the United States, Europe, Canada and Australia. The Company was founded in 1980
and is based in Thousand Oaks, California.

Highlights

A strong track record of revenues

The Company’s revenue has almost doubled in the last six years, going from $7.9 billion in 2003 to approxi-
mately $15.1 billion in 2008. AMGN earns approximately 97% of revenues from the sales of human therapeutic
products. For 2007 and 2008, AMGN reported a modest growth of product sales due to a drop in the sales of
Aranesp, AMGN’s flagship anemia drug. However, the decline in Aranesp was offset by a greater demand for
ENBREL and Neulasta®/NEUPOGEN. International product sales in 2008 are likely to represent 22% of total
product sales. In late December 2008, Reuters ranked the Company third among the top 10 best performers for
the year in the S&P 500 index, in terms of percentage gains.

Revenue, $ Mn

Source: SEC filings; Yahoo Finance;;

High profitability margins

AMGN is one of the most gainful companies in the industry in terms of profitability. AMGN’s gross and net
margins remained strong over the last four quarters. The Company’s gross margin onQ3 2008 sales rang in at
82.5%. The slight decrease of the margin in third quarter of fiscal 2008 was primarily due to a decline in domestic

Amgen Inc. (NASDAQ: AMGN) 2

 Analyst: Victor Sula, Ph.D.
Initial Report
January 9th, 2008

demand for its flagship drug Aranesp, as well as pricing pressures.

Gross Margin, %

Source: SEC filings;

Restructuring plan to improve the cost structure

In the second half of 2007, AMGN announced a plan to restructure its worldwide operations in order to improve
the cost structure while continuing to make significant R&D investments, and to build the framework for the fu-
ture growth. Through September 30, 2008, the Company has completed a majority of the actions initially included
in the restructuring plan: (i) worldwide staff reductions aggregating approximately 2,500 positions, (ii) ratio-
nalization of worldwide network of manufacturing facilities in order to gain cost efficiencies, while continuing
to meet future commercial and clinical demand for its products and product candidates and, to a lesser degree,
changes to certain R&D capital projects and (iii) abandoning leases primarily for certain R&D facilities that will
not be used in its operations. Through September 30, 2008, AMGN incurred a total cost with respect to these ac-
tions of $790 million. The total cost of restructuring program was projected to near $925 million.

Solid balance sheet and operating cash flow

As of September 30, 2008, the Company has a strong balance sheet, with approximately $9.8 billion in cash, cash
equivalents and short-term investments. The Company also reported significant cash flows from operations that
neared $4.5 billion for the first nine months of 2008.

2009

Amgen Inc. (NASDAQ: AMGN) 3

 Analyst: Victor Sula, Ph.D.
Initial Report
January 9th, 2008

Selected balance sheet data, $ Bn

31-Dec-07 30-Sep-08

Total Assets, including 34.6 37.0

Cash and cash equivalents 7.2 9.8

Liabilities, including 16.8 17.2

Debt 11.2 11.2
Equity 17.9 19.8

Source : SEC Filings.

Despite the financial crisis, the Company, due to its conservative investment portfolio, does not have exposure
to subprime mortgages and other risky investments.

Heavy investments in R&D to support a solid pipeline of drug candidates

For about 30 years, the Company has been an innovator in the identification, isolation, production and use of
human proteins as therapeutic agents. In building its pipeline, AMGN focuses on products with significant
differentiation from existing drugs and delivers a number of innovative products that provide important treat-
ments for patients around the world. In addition to internal R&D efforts, AMGN acquires companies, acquires
and licenses certain product and technology rights and establishes R&D collaborations.

The Company follows a large, sustained and smart R&D investment strategy. Each year AMGN tries to invest on
the order of 20% of its revenues in research and development. Since 2001, the Company has invested more than
$17 billion to expand its R&D capabilities; its R&D pipeline has more than doubled.

In 2001, the Company had two blockbuster products and today it has five blockbusters on the market. Over the
next five years AMGN plans to have three more drugs, which could achieve blockbuster status. In addition, the
Company is anticipating 17 key phase 2 and 3 clinical study results in 2009 and 2010, including for denosumab
(oncology), AMG 386 and AMG 655 for various cancer indications, and its Sensipar/Mimpara EVOLVE trial, an
outcomes study in dialysis patients.

Denosumab the next blockbuster drug for AMGN

In July 2008, the Company reported that its new drug – Denosumab, the
first fully human monoclonal antibody, which significantly reduces the
risk of bone fracture in post-menopausal women, had passed the FDA
phase 3 trials. AMGN seeks Denosumab’s approval for two purposes:
treatment and prevention of osteoporosis in post-menopausal women;
and prevention and treatment of osteoporosis in breast cancer and in
prostate cancer patients who have had hormone therapy.

AMGN submitted its Biological License Application for Denosumab to

the FDA on December 19, 2008. If all goes well, the company could begin
marketing Denosumab by the end of 2009. The drug is set to become a

Amgen Inc. (NASDAQ: AMGN) 4

 Analyst: Victor Sula, Ph.D.
Initial Report
January 9th, 2008

blockbuster and is seen as AMGN’s biggest growth driver over the next five years, with sales forecast to range
from of $1.5 billion to $3 billion by 2012.

Aranesp sales in the U.S. are set to decline due to significantly restricted Medicare reimbursement for use of
Aranesp

The launch of Aranesp for the treatment of chemotherapy-induced anemia was in the mid-year 2002. Already in
2003, worldwide Aranesp sales were $1.5 billion. The sales of the drug peaked in 2006 when sales of more than
$4.1 billion were reported, representing 30% of the Company’s total revenues.

However, since 2007, AMGN is experiencing a decrease in the Aranesp sales, driven mainly by the U.S. regulatory
and reimbursement developments, as well as specific events, including a slight decline in share, price pressures,
new oncology label/REMS, contract changes and the development of biosimilars (Europe). The Company is ex-
pecting an additional decline of 10%-20% in Aranesp sales before a longer-term stability is achieved in 2009.

Favorable industry outlook

The biotechnology industry has been an engine of innovation for the U.S. healthcare system and, more generally,
the U.S. economy. The biotechnology industry has expanded rapidly since 1992, with revenues increasing from $8
billion in 1992 to more than $60 billion presently. It is one of the most research-intensive industries in the world,
spending in 2006 more than $20 billion. Within the biotechnology market, oncology will continue to be an area of
prime focus for many organizations, with strong product lines as well as strong pipelines.

Investment sentiment
AMGN is a leading human therapeutics company in the biotechnology
industry, which has pioneered the scientific discovery and innovation to
advance the practice of medicine for more than 25 years.

Despite the recent problems such as clinical trial setbacks and safety con-
cerns surrounding its Aranesp and Epogen drugs, the Company is recov-
ering with investment in R&D that more than double the size of AMGN’s
pipeline. In addition, the Company is likely to weather the current finan-
cial storm and, moreover, it expects to take advantage of the current finan-
cial crisis that will cause hundreds of small biotechnology companies to
turn to their larger counterparts in coming months.

The Company’s future growth driver is expected to be Denosumab, which

is estimated by analysts to have peak yearly sales in the range of $1 billion to $2 billion. Thus, if Denosumab will
be a runaway success, AMGN is poised to be among the top companies in terms of revenue and earnings growth
in the industry over the next five years.

Despite the many macro in the market, the big biotechnology companies have solid positions and are poised
to improve their pipelines of drug candidates since the smaller research companies are facing liquidity issues.
AMGN is currently trading at 12.48x times 2009 EPS consensus estimate, which is in line with the peer group
median. However, we expect AMGN to trade closer Genetech (DNA) multiples given the future sales potential of
Denosumab.

Amgen Inc. (NASDAQ: AMGN) 5

 Analyst: Victor Sula, Ph.D.
Initial Report
January 9th, 2008

Comparative analysis

Price Mrkt.
Company Name Ticker per Cap. P/E P/S
5-Jan-09 symbol Share,$ $ Mn 2008 2009 2008 2009
Genentech Inc. DNA 84.74 89,150 24.71 21.56 6.66 6.17
Bristol-Myers Squibb Co. BMY 22.49 44,520 13.31 11.42 2.14 2.01
Merck & Co. Inc. MRK 29.24 61,780 8.86 8.94 2.59 2.57
GlaxoSmithKline plc GSK 38.84 99,230 10.85 10.85 2.85 2.86
Median 12.08 11.13 2.72 2.71

Amgen Inc. AMGN 58.42 61,890 12.84 12.48 4.11 4.01

Source : Yahoo Finance

Taking in consideration the solid results reported for the last years, the favourable outlook for the biotechnology
market and the blockbuster potential of Denosumab, we rate AMGN as a “Buy.”

Amgen Inc. (NASDAQ: AMGN) 6

 Analyst: Victor Sula, Ph.D.
Initial Report
January 9th, 2008

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I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and
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this report.

Victor Sula, Ph.D. - Senior Analyst

Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior
Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Produc-
tivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the
Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic
Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

Amgen Inc. (NASDAQ: AMGN) 7