Biotech is the land of promise for emerging players.  It is also the land of stagnation for well established and sturdy giants.  Amgen, Inc. (NASDAQ: AMGN), Biogen Idec Inc. (NASDAQ: BIIB), and Genzyme Corp. (NASDAQ: GENZ) all fit into the latter group.  These three have also had issues that have acted as anchors on the neck of all their shareholders.  What is interesting is that they all have new developments that may be the next catalysts for growth.

Amgen Inc. (NASDAQ: AMGN) is up over 8% at $55.00 today after an unexpected FDA approval, but that is still in the middle of a long-term trading range.  Over the last year shares have seen a range of $49.21 to $64.76, and the market cap today is almost $53 billion.

Amgen is large enough with enough patent and political risk built into its share price already.  The company is just another Big Pharma company now.  When you heard all the political bantering about ‘generic biologics’ it was aimed at Amgen’s anemia franchise.  Its latest FDA approval from last night was a surprise since it wasp about seven weeks ahead of schedule.  Prolia will be used to treat osteoporosis in post-menopausal women and also bone loss in men with prostate cancer, and it is believed to have a blockbuster status with over $1 billion in annual sales.

Biogen Idec Inc. (NASDAQ: BIIB) has been in a jam for years with no real continued share growth after its TYSABRI woes surfaced as PML case side-effects.  With shares at $47.90 after a near 1.5% gain, the 52-week range is $41.75 to $60.28.  Its market cap is about $12.8 billion and almost every single recovery has been dashed by announcements about new PML cases.

The company lost its CEO.  Frankly, TYSABRI is such a good MS drug that the PML cases should have just been noted as a side-effect more clearly up front and the drug should not have been pulled from the market.  The biggest issue was that it happened in the Vioxx era, so the company wanted to keep its image up.  Now the PML risks have been reported about in a way that we think TYSABRI could have a larger market had it been handled properly.  An old effort to sell the company was brief and fruitless enough that you might wonder if it just posted a “For Sale” sign on Craigslist and let it expire in two weeks.  Carl Icahn is also a holder, and while he might not be able to easily orchestrate a sale he is still making waves here.  If one company is the king of MS treatments, look no further than Biogen Idec.  And now Biogen is trying to go after other MS drug makers citing its patents.

On Genzyme Corp. (NASDAQ: GENZ)…. Shares are still under $50.00 around $48.70 today and its 52-week range is $45.39 to $63.47.  The market capitalization after it lost one-quarter of its value is $13 billion.

The FDA recently approved Genzyme’s Lumizyme, a new version of its drug designed to treat a rare illness called Pompe disease, which is similar to its existing drug Myozyme that was approved back in 2006.  Genzyme reportedly could not meet the demand for the product and had proposed producing the product on a larger manufacturing scale.  Genzyme has also sued Watson over generic Renvela plans.  The company also recently was fined for $175 million over its manufacturing failures, although this was deemed as a WIN by most.  As of the end of May, Genzyme was estimates to be shipping out its Cerezyme at a rate that meets about 50% of demand.  Carl Icahn also increased his stake during the first quarter, and while he might not be able to easily secure a sale of this size he might be able to keep raising hell to make management keep running.  This is one where we see a chance that the CEO might not entirely survive if things run into more trouble.

FAIR VALUE COMPARISONS

Amgen is still growing despite the woes, and Thomson Reuters has estimates at $5.12 EPS and $15.12 billion in revenue for 2010 and the estimates are $5.48 EPS and $18.84 billion in revenues for 2010.  Does 10-times earnings ahead tell you that a lot of potential news is being buffered into the stock?  If Amgen’s kinks can be smoothed out, this could be a $60 stock without any caution.  If any more new pipeline payoffs come out or if it can make a significant pipeline grab in an acquisition, Amgen could be north of $75 before any real questions come up on valuation.  Still, there are many ‘ifs’ and this has been an ongoing issue for years.  We have also flagged Amgen as one of the first more likely biotech cash dividend candidates as well.  Analysts have an average price target over $68.00 for Amgen.

Biogen Idec is also still growing despite all the issues.  Thomson Reuters has estimates of $4/57 EPS and $4.53 billion in revenues in 2010 and $4.89 EPS and $4.66 billion in revenues for 2011.  This too is cheap at near enough 10-times earnings ahead that much of the TYSABRI woes should be priced in.  Any new big wins would be a plus, but Biogen could trade close to $60 before anyone’s valuation call starts to come into play.   Analysts have an average price target of roughly $57.00 for Biogen Idec.

Genzyme is the dart board game of the three that could go either way.  If things are truly looking up and if it has genuinely resolved most of its FDA issues then the $175 million settlement will be a footnote in history.   The issue is that the woes have interrupted its real growth drivers.  For the stock to not sound expensive, you have to compare the 2011 Thomson Reuters data of $3.79 EPS and $5.63 billion revenues.  That generates just under 13-times 2011 earnings.  Not super-expensive, but not dirt cheap when you consider the others.  The trick is the surprise potential, and if its earnings situation gets resolved it could have real upside.  Analysts have a target still above $62 for a year out, so there are still many who feel this can be worth much more than being under $50.00.

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JON C. OGG

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