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July 28, 2008, 11:22 a.m. EDT

Amgen gains on osteoporosis study; results on tap

By Val Brickates Kennedy, MarketWatch

BOSTON (MarketWatch) -- Shares of Amgen Inc. rallied Monday, propelled by positive trial data on osteoporosis drug candidate denosumab, a product that many investors are hoping can jump-start the biotech giant's top line.

Amgen's shares were up 13% at $60.93 in midmorning action.

Thousand Oaks, Calif.-based Amgen (NAS:AMGN) also is slated to report second-quarter financial results after the bell.

/zigman2/quotes/209157011/composite AMGN 280.55, -5.02, -1.76%
/zigman2/quotes/210598458/delayed BTK 5,257.69, -51.67, -0.97%

Late Friday, Amgen said that a large-scale Phase III study showed post-menopausal women who took denosumab had a notably lower rate of incurring vertebrae fractures than those who took a placebo.

The so-called FREEDOM study -- short for "fracture reduction evaluation of denosumab in osteoporosis every six months" -- tested the product on about 7,800 women. Plans are to release further details at a medical conference in September, Amgen said.

Analysts at Robert W. Baird and Rodman & Renshaw told MarketWatch that Monday's market action was in reaction to data rather than the upcoming release of results.

Amgen's shares have been in a slump this year due to slowed sales of Epogen and Aranesp, its flagship anti-anemia products. Sales of the medications have been under pressure over concerns that they may cause serious complications in users under certain circumstances.

'Future blockbuster'

Analysts at Cowen & Co. said Monday that if approved, denosumab would have worldwide sales in excess of $1 billion by 2012.

The denosumab data prompted many brokers to raise their ratings of the stock.

Rodman & Renshaw analyst Michael King wrote in a research note Sunday that while previous studies have showed denosumab to be largely effective, the Phase III trial reinforced its safety profile.

"While data from Phase II and Phase III trials of denosumab have been consistently positive, the total risk/benefit profile of the molecule has remained elusive," King wrote.

"However, with the announcement that the incidence and severity of adverse events in the FREEDOM trial were similar between denosumab- and placebo-treated patients, we now view the drug's status as a future blockbuster to be secure, in our opinion," King added, raising his target price to $80 a share.

Jeffries & Co. upgraded Amgen to buy, with a new price target of $71.

"Going into the pivotal denosumab data, investor concerns had focused on rates of serious infections and neoplasms, as a significant imbalance in either could have derailed the drug. We find the lack of such signals in context of the large trial size highly reassuring, particularly since slight numerical imbalances in previously reported smaller trials had suggested a potential safety issue might exist," wrote Jefferies analyst Adam Walsh.

"While important trial details still remain to be seen, we believe the positive top-line data suggest that denosumab will likely be approved in the large post-menopausal osteoporosis market," Walsh added in his note.

Later Monday, Amgen is expected to report modestly lower earnings for the June quarter, due mostly to a continued slump in the market for Aranesp and Epogen. Aranesp, Amgen's lead product, is a successor product to Epogen.

Mean earnings are seen at $1.01 a share. Sales are expected to come in at $3.57 billion, down from $3.61 billion, according to FactSet Research.

Cowen & Co. analysts have projected that Aranesp sales will fall 21% from last year's quarter, to $750 million. Sales of Epogen are seen as slipping 2% to $610 million.

On a brighter note, sales of the rheumatoid arthritis medication Enbrel, co-marketed with Wyeth , are expected to climb 4% to $860 million. Combined sales of the products Neulasta and Neupogen are seen as increasing 9% to $1.13 billion.

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