Analyst: Victor Sula, Ph.D.

Initial Report January 9th, 2008


01/8/09 62 60 58 56 54 52 50 48 volume 46 ©
30 20 10 0

Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 Phone: +1 805-447-1000 Fax: +1 805-447-1010 Website:





Share Statistics (12/23/08)

NASDAQ 2006 2007 %Chg
AMGN $57.93 6,040,625 $22.014 Bn 1,059 Mn EPS, $ 3.51 3.86 10.0% Revenues, $ Mn. 13,858 14,311 Gross margin Net margin 3.3%



2007 2008 %Chg
11,026 11,252 2.0%

Symbol Current price Low/ High 52 weeks Average Volume Market Capitalization Shares Outstanding

85.3% 82.8% -2.5 b.p. 82.4% 84.5% 2.1 b.p. 20.7% 21.4% 0.7 b.p. 21.1% 28.8% 7.7 b.p. 2.05 3.00 46.3%

$39.16 - 66.51 Operating margin 26.9% 26.9% 0.0 b.p. 26.5% 36.2% 9.7 b.p.

Source: Yahoo Finance, Analyst Estimates

Amgen Inc. (AMGN, the Company) is a global biotechnology company engaged 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 osteoporosis, inflammation, oncology, neuroscience and hematology. AMGN is considered 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 erythropoiesisstimulating agents (ESAs); Neulasta (pegfilgrastim) and NEUPOGEN (Filgrastim), which selectively stimulate the production of neutrophils, a type of white blood cell that helps the body fight infections; and ENBREL (etanercept) 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 arthritis 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.

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 approximately $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 future 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) rationalization 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 actions 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.

Amgen Inc. (NASDAQ: AMGN)


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

Selected balance sheet data, $ Bn
Total Assets, including Cash and cash equivalents Liabilities, including Debt Equity 34.6 7.2 16.8 11.2 17.9
Source : SEC Filings.

37.0 9.8 17.2 11.2 19.8

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 treatments 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 expecting 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 concerns surrounding its Aranesp and Epogen drugs, the Company is recovering 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 financial storm and, moreover, it expects to take advantage of the current financial 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
Company Name 5-Jan-09
Genentech Inc. Bristol-Myers Squibb Co. Merck & Co. Inc. GlaxoSmithKline plc Median Amgen Inc.

Price Mrkt. Ticker per Cap. symbol Share,$ $ Mn
DNA BMY MRK GSK AMGN 84.74 22.49 29.24 38.84 58.42 89,150 44,520 61,780 99,230 61,890

24.71 13.31 8.86 10.85 12.08 12.84


21.56 11.42 8.94 10.85 11.13 12.48

6.66 2.14 2.59 2.85 2.72 4.11

P/S 2009
6.17 2.01 2.57 2.86 2.71 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)


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

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We encourage you to invest carefully and read investment information available at the websites of the SEC at and FINRA at http://www. All decisions are made solely by the analyst and independent of outside parties or influence. 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 securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in 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 Productivity 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)