Amgen Stock Jumps 15 Percent on Good Earnings News
Jul. 21–Amgen Inc. Director Franklin Johnson Jr. had a seven-figure day. As the largest direct holder of stock in the company, he was one of many beneficiaries of a more than 15 percent run-up in the stock price Wednesday.
Johnson’s 713,749 shares gained $7.6 million in value.
The Thousand Oaks-based biotech company reported Tuesday its second-quarter earnings far exceeded Wall Street expectations and forecast revenue to be 33 percent higher than last year, triggering a massive run on the stock.
Amgen stock (Nasdaq: AMGN) closed up $10.65 to $81.17, after surging as much as $12.58 during trading Wednesday.
It was a bright day on the Amgen campus, said Mary Klem, associate director of corporate communications for Amgen.
“We are just thrilled that investors are recognizing the value of our company, and we see this as well deserved recognition for our strong business performance and our promising pipeline,” she said.
Johnson, 76, has served on the company’s board of directors since October 1980, according to Amgen. He is the general partner of Asset Management Partners, a venture capital limited partnership.
Closing at more than $80 set an all-time high for the 25-year-old company’s stock, up from the previous mark of $79.95. The last time it was even near that price was almost exactly five years ago on July 21, 2000, when it closed at $78.
The higher stock price boosted the company’s market capitalization to more than $100 billion, surpassing rival biotech Genentech Inc., which had a market capitalization of $94.55 billion on Wednesday with a stock price of $89.50.
Amgen is the largest biotechnology company in the world, with 14,300 employees, including close to 7,000 in Thousand Oaks. The company also is the largest private employer in the Ventura County.
Trading on Wednesday was almost 10 times higher than normal as investors reacted to the company’s second-quarter earnings. Amgen reported net income was up 38 percent to $1.03 billion, or 82 cents per share, from $748.1 million, or 57 cents, a year earlier. Revenue rose 23 percent to $3.17 billion.
The information reassured investors, who were concerned that Amgen’s earnings growth was slowing, said SG Cowen & Co. analyst Eric Schmidt. The company’s new forecast for a 2005 profit of as much as $3.20 a share, excluding some items, would be an increase of as much as 33 percent from last year.
“People had just forgotten and ignored Amgen for going on two years, and all of a sudden they beat expectations and raised guidance and gave people a reason to come back and reinvest,” said Jon Fisher, who helps manage about $21.7 billion at Fifth Third Asset Management in Minneapolis, including Amgen shares. “You’ve got a mass of dollars and a mass of investors piling into the stock all once.”
Investor message boards wondered at the new, staggering price. Some predicted that the run-up would lose steam by today and fall off $2 or $3 a share. Others predicted the report was just the momentum the company needed and that the stock price could head for $100.
Analyst recommendations posted on Wednesday almost universally posted a target stock price of more than $80.
Mark Geller from CIBC World Market in New York moved his price target from $72, posted on Monday, to $90. Jyske Bank moved Amgen from a sell recommendation made in April to a buy on Wednesday, with a target price of $80.
The Vanguard 500 Index Fund was one of the other major beneficiaries as the largest mutual fund holder of the stock. The mutual fund had 11.96 million shares at its last reporting with the Securities and Exchange Commission, which would give it a one-day gain of $126 million in value.
Barclays Bank is the largest institutional holder of the stock, with nearly 50 million shares and a more than half a billion dollar benefit.
During a conference call Tuesday, the company said that it has finished enrolling almost 8,000 patients in a Phase III study of the AMG 162 osteoporosis drug, which analysts say is the most promising product under development. The U.S. Food and Drug Administration typically requires three phases of testing before reviewing a drug for approval.
AMG 162 is given just twice yearly and would compete against Merck & Co.’s Fosamax, the No. 1 treatment worldwide for weakening of the bones, which is taken daily or weekly.
Amgen probably won’t begin selling the medicine until at least 2008, Deutsche Bank analyst Jennifer Chao said. The drug has the potential to be a $1 billion product, she said.
The company also said it might release early research assessing Aranesp’s benefit among some heart-failure patients later this year, which might lead some physicians to prescribe the drug for that use, said Christopher Raymond, an analyst at Robert W. Baird & Co. in Chicago. Aranesp is used to treat anemia in cancer patients.
“There’s a realization that Amgen has a pipeline,” Raymond, who rates Amgen shares “outperform” and doesn’t own the stock, said in a telephone interview.
Bloomberg News contributed to this report.
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