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FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay
Amgen Jammin'
Biotechnology firm Amgen Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMGN)") else Response.Write("(Nasdaq: AMGN)") end if %> rose $3 3/16 to $67 this morning after it was placed on the vaunted Goldman, Sachs & Co. "recommend list," a definite step up from its previous rating of "market outperform." Goldman reported that Amgen's Epogen and Neupogen sales were coming in higher than expected and that some of the benefits of holding the company's stock now include a degree of insulation from economic cycles and emerging markets. Amgen is the largest biotechnology company in the world in terms of market capitalization and trailing sales, and in the past has relied heavily on its two main drugs, Epogen and Neupogen, for the majority of its earnings growth.
About a year ago, the common sentiment in the investment community regarding Amgen was downright negative. Investors were concerned about reimbursement issues affecting its anemia drug Epogen, a slowdown in sales of its red cell boosting drug Neupogen, and many were waiting to see if Infergen could make any significant impact on 1998 results. Infergen, which launched last October for the treatment of hepatitis, generated sales of $4 million in the latest quarter. Although the drug is experiencing rough competition from Schering-Plough's Intron-A, most forecasts put 1998 total sales at about a run-rate on Q2 results (around $16 million). Total product sales came in at $611 million in the second quarter, up 8% year over year, and worldwide sales of Epogen increased to $337 million from $295 million, a 14% increase year over year. Since these second quarter results were released, most estimates for Neupogen returns have climbed, due to both perceived growth of the patient population as well as the easing of Health Care Financing Administration reimbursement rules.
The new rules eliminated "prepayment audits" and raised the allowable 90-day average maximum hematocrit (red blood cell level test) from 36.5% to 37.5%, thus giving physicians greater opportunity to prescribe Epogen. Last year, analysts also complained that the company's exclusive in-house development efforts and its $500-$600 million a year in R&D expenditures were yielding a lackluster product pipeline. Update -- at the end of July an FDA advisory panel recommended the full approval of Stemgen, a growth factor for stem cells, for bone marrow transplant patients. Amgen also recently began a 1,500-patient phase III trial evaluating Novel Erythropoiesis Stimulating Protein (NESP) in dialysis patients. As well, Amgen began a phase I clinical trial of its second generation "soluble TNF-R1" for patients suffering from rheumatoid arthritis, and the company presented preliminary data from its phase I and II anti-obesity leptin drug trial at the American Diabetes Association Meeting in June. What a difference a year can make.
Banking and financial services stocks got a lift this morning as Alan "G-Money" Greenspan hinted in a speech late Friday that the Federal Reserve may consider an interest rate cut in the future, which would be a change from the Fed's prior "bias" toward a future hike in the key Fed Funds rate. Travelers Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %> gained $3 13/16 to $42 7/8, merger partner Citicorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> climbed $9 5/16 to $101 13/16, Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %> moved up $2 7/16 to $47 13/16, NationsBank <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NB)") else Response.Write("(NYSE: NB)") end if %> added $2 1/2 to $56 1/2, American Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %> rose $6 13/16 to $80 7/16, and Fannie Mae <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNM)") else Response.Write("(NYSE: FNM)") end if %> gained $2 7/8 to $61.
Aircraft maker Boeing Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> rose $1 9/16 to $35 1/2 after saying it has received orders for 21 jets from KLM Royal Dutch Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KLM)") else Response.Write("(NYSE: KLM)") end if %> and American International Group's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIG)") else Response.Write("(NYSE: AIG)") end if %> International Lease Finance Corp. subsidiary. Also, Brazilian airline Varig said this morning that it will spend about $2.7 billion to buy as many as 39 new Boeing jets.
General Electric Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> added $3 1/2 to $79 3/8 after saying yesterday that new products, acquisitions, and joint ventures could boost its aircraft engine unit's fiscal 1998 revenues to about $5 billion from $3 billion a year ago.
Electric power company AES Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AES)") else Response.Write("(NYSE: AES)") end if %> generated a $5 gain to $29 1/4 after Morgan Stanley Dean Witter started coverage with a "strong buy" rating.
Telecommunications wide area networking (WAN) systems developer Ascend Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> advanced $5 3/8 to $44 1/8 after Bell Atlantic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEL)") else Response.Write("(NYSE: BEL)") end if %> named the company its primary supplier of next generation asynchronous transfer mode (ATM) and frame relay switches for the Baby Bell's high-speed data network. The multi-year contract is an extension of a previous partnership between the two firms.
TV and radio stations operator Sinclair Broadcast Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBGI)") else Response.Write("(Nasdaq: SBGI)") end if %> gained $15/16 to $19 3/8 after agreeing to buy the six TV stations owned by privately held Guy Gannett Communications for $310 million in cash. In addition, Sinclair plans to sell Gannett's station in Rochester, New York (which competes with an existing Sinclair station) to The Ackerley Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AK)") else Response.Write("(NYSE: AK)") end if %> for unspecified terms.
Drug delivery systems developer Atrix Laboratories <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATRX)") else Response.Write("(Nasdaq: ATRX)") end if %> climbed $1 to $14 after the FDA approved its Aytridox therapy, which is a bioabsorbable antibiotic gel for treating periodontal disease.
Elsewhere in the biotech world, MedImmune <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MEDI)") else Response.Write("(Nasdaq: MEDI)") end if %> moved up $4 1/2 to $55 after the FDA gave the green light to an additional German contract manufacturing facility for the company's Synagis drug, which is a treatment for a serious lower respiratory tract disease in children.
Internet homepage community operator GeoCities <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GCTY)") else Response.Write("(Nasdaq: GCTY)") end if %> gained $1 13/16 to $22 11/16 after Goldman Sachs started coverage with a "market perform" rating. Coincidentally (or not), Goldman was the lead underwriter for the company's initial public offering last month. Elsewhere in Internet-land, America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> rose $6 1/4 to $92 1/4, Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> picked up $5 15/16 to $81 5/16, Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> moved up $2 7/16 to $28 5/16, Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> climbed $1 15/16 to $19 1/16, Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> added $5 1/2 to $91 3/4, and CMG Information Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMGI)") else Response.Write("(Nasdaq: CMGI)") end if %> advanced $3 11/16 to $46 3/16.
Telecommunications equipment maker Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> was lifted $4 1/4 to $79 1/2 thanks to a BT Alex. Brown upgrade to "buy" from "market perform."
Internet advertising agency 24/7 Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TFSM)") else Response.Write("(Nasdaq: TFSM)") end if %> rose $1 3/4 to $11 5/8 after Merrill Lynch started coverage with near-term and long-term "buy" ratings. Merrill was the lead underwriter for the company's initial public offering last month.
Computer storage hardware and software developer EMC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %> rose $3 7/8 to $52 7/8 after CS First Boston started coverage with a "buy" rating and named the company its "featured stock of the week." The 12-month price target is $70 per share.
Appliance designer and manufacturer Global-Tech Appliances <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GAI)") else Response.Write("(NYSE: GAI)") end if %> was steamed for a $1 3/8 loss to $5 1/8 after the company announced on Friday that it has not received the increased orders from Sunbeam <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOC)") else Response.Write("(NYSE: SOC)") end if %> that it had expected. As a consequence, the company will report lower-than-expected revenues for the second quarter and full fiscal year, plus it will scale back by 60% the expansion of its Dongguan, China, manufacturing facility and hold the residual cash that it raised in its April initial public offering at $19 per share.
Heilig-Myers <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMY)") else Response.Write("(NYSE: HMY)") end if %> fell $1 15/16 to $8 15/16 after the furniture retailer and finance company reported a 2.1% decrease in August same-store sales. Total August sales were up 5.6%, but the company expects to report a small year-over-year decline in second quarter EPS due to "sales and margin shortfalls" at its Rhodes division. Analysts had been expecting EPS anywhere from $0.18 to $0.25 for the quarter, but this will be the second consecutive quarter of flat year-over-year comparisons in the second quarter, as the company reported EPS of $0.16 in Q2 of both 1997 and 1996.
Managed health care and insurance services outsourcer Concentra Managed Care <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCMC)") else Response.Write("(Nasdaq: CCMC)") end if %> blew up and lost $6 3/16 to $6 this morning after the company said it expects third quarter revenues and earnings per share to come in below expectations. Without explaining the drivers behind the below-plan revenues and earnings, the company said it expects Q3 revenues of $160 million and EPS of $0.29, compared with analysts' estimates of $169 million and $0.34, respectively. The company also expects to report Q4 EPS of $0.21, bringing the company's full-year EPS $0.10 below the current Zacks mean estimate of $1.12.
Lincare Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LNCR)") else Response.Write("(Nasdaq: LNCR)") end if %> fell $3 7/16 to $33 after SBC Warburg Dillon Read lowered its rating on the home respiratory services company to "hold" from "strong buy," according to Reuters. The company faces more pricing pressure on government reimbursements, according to analyst Steve Valiquette. Already this year, the company has faced a 25% decline in Medicare payments for oxygen and oxygen equipment and a 5% decline in payments for biologicals and drugs.
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
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