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FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump

Amgen Wins! Amgen Wins! Amgen Wins!

While not quite as unlikely as seeing the Chicago Cubs declared World Series Champions, biotech bellwether Amgen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMGN)") else Response.Write("(NASDAQ: AMGN)") end if %> surprised analysts by announcing late Friday that it had won an arbitration battle against pharmaceutical giant Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %>. Amgen shares gained $17 9/16 to $105 11/16 this morning, while Johnson & Johnson fell $2 15/16 to $76 9/16.

The arbitration was focused on who owns rights to the next generation of rapidly growing $3 billion anemia drug EPO, NESP. Expected to be on the market in 2000 or 2001, NESP should allow patients to take the drug only once a week rather than three times weekly. Marketing rights for EPO are currently split between the two companies through a 1985 agreement where Johnson & Johnson helped fund a then-upstart Amgen. Johnson and Johnson claimed that rights to NESP should also be split based on this accord, while Amgen argued it was a new drug and should not be subject to the prior accord. The binding arbitration ruling, which is not subject to an appeal, gives Amgen all rights to NESP.

Friday's announcement appears to have surprised most analysts, who didn't expect such a clear-cut victory for Amgen. At least twelve brokerage firms have raised their ratings on Amgen, including Merrill Lynch, Goldman Sachs, Morgan Stanley, and PaineWebber. This victory is very important to Amgen for several reasons. Adding NESP to its product pipeline means that a potential blockbuster is only two to three years away rather than four or five years as discussed in the recent Rule Breaker buy report on Amgen.

Considering that Amgen currently has a gross margin of over 86%, throwing an additional billion dollar drug into the hopper means that an extra $860 million dollars will be available to cover operating expenses and add to profits. The most significant operating expense for Amgen is research and development, in which the company invested 28% of last year's sales. By having another blockbuster drug, Amgen can continue increasing its dollar expenditures in attempting to find new uses. It will also have plenty of cash to help fund (and gain rights to) promising discoveries at smaller biotech firms that don't have strong cash flows.

While today's news is extremely positive for Amgen's long-term growth, there are (as always) risks. NESP is still in the final phase of testing, and there is the possibility that adverse results could prevent or delay introduction of the new drug. Although Johnson and Johnson has lost rights to NESP, it can do the same thing Amgen has done and attempt to create another improved version of EPO. At this time, Johnson and Johnson is working with Alkermes <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALKS)") else Response.Write("(Nasdaq: ALKS)") end if %>, a small biotech company that jumped $2 7/8 to $21 5/8 this morning, on a version of EPO that is only needed once or twice a month. This drug is in the early stages of testing, but could prove to be a competitor in future years. Nonetheless, Amgen shares are deservedly soaring on the improved prospects related to this arbitration ruling.

UPS

Telecommunications equipment and software company Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> won $4 1/16 to $102 7/16 following reports that mobile phone maker Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> will announce that it is buying Lucent's consumer wireless business for between $100 million and $200 million. The deal will give Motorola a needed R&D (research and development) boost and allow Lucent to start divesting certain businesses in the wake of ending its unsuccessful cellular phone joint venture with Philips Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHG)") else Response.Write("(NYSE: PHG)") end if %>.

Online services stalwart America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> shot up $9 3/8 to $113 5/8 after it announced a multi-year marketing agreement with PC maker Dell <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> in which AOL software will be shipped with certain Dell computers. Dell rose $2 1/2 to $70 3/8 this morning.

Internet auctioneer Onsale <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONSL)") else Response.Write("(Nasdaq: ONSL)") end if %> rocketed ahead $12 11/16 to $56 3/8 after it announced a deal with portal company Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> to provide auction content for Yahoo!'s Small Business website. Yahoo!, which also announced the launch of Catalog City's online shopping content on its shopping site, moved up $25 3/16 to $237 1/2.

Data equipment giant Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> added $4 1/2 to $94 15/16 after it announced the availability of version 12 of its IOS Internet systems software. Two Fools dueled over Cisco last week, and while it wasn't, as the Dread Pirate Roberts once said, "to the pain," there will be a vote.

Data networking firm 3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> spread $2 7/16 to $47 3/16 after it announced a $6 million investment in wireless data service provider and systems integration company Aether Technologies, expanding an existing partnership to develop a wireless enterprise platform for palm computing. 3Com also invested $5 million in an Israeli Internet and technology venture capital fund.

Specialty chemical company LeaRonal Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LRI)") else Response.Write("(NYSE: LRI)") end if %> jumped $6 13/16 to $33 5/8 after Rohm & Haas Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ROH)") else Response.Write("(NYSE: ROH)") end if %> agreed to buy the company in a $460 million stock deal valuing LeaRonal at $34 per share, about a 27% premium to Friday's close. Rohm & Haas, which rose $7/8 to $29 1/2 this morning, will combine LeaRonal with its Shipley Co. division.

General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> drove ahead $1 5/8 to $73 1/8 after Toyota <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TOYOY)") else Response.Write("(Nasdaq: TOYOY)") end if %> confirmed that the companies are in talks regarding the expansion of their alliance in advanced vehicle technologies such as electric vehicles, fuel cells, and other areas.

Specialty and online retailer Sharper Image Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHRP)") else Response.Write("(Nasdaq: SHRP)") end if %> advanced $2 11/16 to $13 after announcing a promotional agreement with financial news site CBS MarketWatch.com.

MySoftware Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MYSW)") else Response.Write("(Nasdaq: MYSW)") end if %>, which provides productivity software and Internet services for small- and mid-sized businesses, added 1 3/16 to $11 7/16 after announcing plans to co-market its MyProspects business development service with privately held printing, copying, and digital network franchiser Sir Speedy.

Information technology consultant AnswerThink Consulting Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANSR)") else Response.Write("(Nasdaq: ANSR)") end if %> grasped $4 1/8 to $23 9/16 after Morgan Stanley Dean Witter upgraded the company to "outperform" from a "neutral" rating.

Payment software and services firm CyberCash Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %> rang up gains of $2 7/16 to $15 5/8 after it said Barclays Merchant Services, which handles credit and debit card purchases at more than 125,000 shops and businesses in the U.K., chose its payment systems for a new electronic point-of-sale system.

Lawn, garden, and pet-supply products distributor Central Garden & Pet Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CENT)") else Response.Write("(Nasdaq: CENT)") end if %> grew $3/4 to $13 after it said it is increasing its stock buyback program to up to $55 million from $25 million in shares.

Healthcare programs provider America Service Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASGR)") else Response.Write("(Nasdaq: ASGR)") end if %> improved $3/4 to $10 5/8 after agreeing to buy MedPartners' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDM)") else Response.Write("(NYSE: MDM)") end if %> government-services unit for $67 million.

Propane and related products and services retailer Suburban Propane Partners <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SPH)") else Response.Write("(NYSE: SPH)") end if %> wafted up $1 5/16 to $19 after Merrill Lynch upgraded the stock to "trading buy" from "market outperform."

Savings and loan holding company Peekskill Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PEEK)") else Response.Write("(Nasdaq: PEEK)") end if %> spied gains of $3 to $16 1/4 after announcing plans Friday to commence a buyback of up to 800,000 shares, or 28% of its outstanding stock, beginning Wednesday.

Systems management software designer New Dimension Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DDDDF)") else Response.Write("(Nasdaq: DDDDF)") end if %> expanded by $2 7/8 to $41 1/8 after it won a $1.3 million contract from electrical products and services supplier Square D Co.

DOWNS

Canadian fuel cells maker Ballard Power Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLDPF)") else Response.Write("(Nasdaq: BLDPF)") end if %> was zapped $2 21/32 to $28 13/32 after Barron's reported that two of the three fuel-cell powered buses the company is testing with the Chicago Transit Authority were taken out of service earlier this year for modifications and upgrades due to problems with the fuel cells and powertrain designs.

Food and construction materials processing equipment maker Gencor Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GX)") else Response.Write("(AMEX: GX)") end if %> dropped $1 7/8 to $8 3/8 after pre-announcing a fiscal Q1 loss between $0.15 and $0.20 per share due to citrus industry problems in Brazil and falling meat production prices. The results will fall short of the First Call mean earnings estimate of $0.39 per share. On the bright side, the company expects to meet analysts' earnings estimates for fiscal 1999.

Document finishing and paper shredding products maker General Binding Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GBND)") else Response.Write("(Nasdaq: GBND)") end if %> came unglued and lost $2 1/4 to $37 1/2 after saying Q4 earnings will be in the $0.34 to $0.39 per share range due to slumping domestic sales. The First Call mean estimate had called for earnings of $0.54 per share.

Laser-based electronics manufacturing systems maker Electro Scientific Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESIO)") else Response.Write("(Nasdaq: ESIO)") end if %> gave back $2 3/8 to $41 5/8 after rising 30% Friday on announcing fiscal Q2 EPS of $0.16, which beat the First Call mean estimate by $0.02.

Dental practice management firm Monarch Dental Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDDS)") else Response.Write("(Nasdaq: MDDS)") end if %> chipped off $1/4 to $9 7/8 after Salomon Smith Barney lowered its rating to "outperform" from "buy."

Paging and wireless services company PageNet <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAGE)") else Response.Write("(Nasdaq: PAGE)") end if %> lost $3/4 to $4 1/2 after saying higher operating costs from a new customer service program will impact its Q4 results. The company added that it sees the number of its pagers in service decreasing by 275,000-325,000 units in Q4, which is a higher figure than some analysts had been anticipating.

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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), another Fool David Marino-Nachison (TMF Braden), a new Fool Editing Brian Bauer (TMF Hoops), another Fool Bob Bobala (TMF Bobala), a Fool's Fool Jennifer Silber (TMF Amused), Fool at last