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Market Scan
Amgen Amps Up Healthcare SectorRuthie Ackerman, 01.08.08, 5:15 PM ET


What a difference a few cents per share can make.

Amgen, the world's largest biotech company, announced Tuesday that its cost-cutting initiative paid off, moving 2007 profits higher than forecasted in October. The announcement, by Amgen’s Chief Executive Kevin Sharer at this year's JP Morgan Healthcare Conference in San Francisco, sent shares of the healthcare sector soaring 2.3%, making it the hottest sector in the Dow Jones industrial Average on a day when the broader index was down 0.7%.

The company now predicts 2007 earnings per share to be close to $4.30 per share, above the previously announced guidance of $4.13 to $4.23 said Sharer.

Amgen announced it implemented cost cutting actions, including slashing 13% of its staff. The company also said research and development expenses as a percentage of sales will decrease slightly compared to 2006 levels. The Thousand Oaks, Calif.-based company also said it is on track to deliver cost savings in 2008 as a result of the restructuring.

Last January, before the U.S. Food and Drug Administration raised concerns about side effects of some anemia drugs, Amgen had forecast 2007 earnings between $4.30 per share and $4.50 per share.

The company's stock price tumbled when the FDA issued a “black box” warning–its most serious–on erythropoiesis-stimulating agents after research suggested high doses increased patients' risk of tumors and death. ESAs, such as Amgen’s Aranesp and Epogen, are used to treat anemia.

In 2006, Amgen raked in $6.6 billion, nearly half of its sales, from Aranesp and its predecessor Epogen. But after the FDA’s warning, Aranesp and Epogen brought in combined sales of $4.5 billion at the end of the third quarter of 2007, a decline of 11% from the prior year’s period.

The FDA’s warning cut into sales of the two drugs. In October, after sales fell Amgen predicted 2007 earnings per share between $4.13 and $4.23. Analysts polled by Thomson Financial forecast, on average, an annual profit of $4.24 per share.

Amgen shares jumped $1.47, or 3.2%, to $46.86 in afternoon trading. The stock has plunged since last January when it reached its 52-week high of $76.95.

JP Morgan’s healthcare conference brought with it a slew of good news, which buoyed the sector. Genzyme shares shot up 1.8%, or $1.41, to $78.51 in afternoon trading, after the biotech company’s CEO Henri A. Termeer said that its fourth-quarter sales for 2007 jumped 21%, beating Wall Street’s expectations.

Genentech jumped 3.1%, or $2.08, to $68.35; Bristol Myers Squibb shares increased 2.5%, or 65 cents, to $26.69. Isis Pharmaceuticals skyrocketed to a new six-year high after it announced a co-development deal with Genzyme involving the late-stage cholesterol treatment mipomersen, which could be worth more than $1.9 billion. Isis shares soared 29.6%, or $4.32, to $18.90.

The only loser on Tuesday was Biogen, which lost 3.7%, or $2.21, to $57.01 on Tuesday on what looks like profit-taking after its shares rose more than 7% on Monday when the company announced a 2008 earnings forecast at or above Wall Street estimates.

The Associated Press and Reuters contributed to this article.