Notable Calls

- Goldman Sachs notes that assuming the limitations are implemented, except for MDS, Aranesp sales in 2008 might be reduced by 30% which is consistent with their 2007-09 forecast of $2.4bn (-13% yoy), $2.4bn (+ 0%), & $2.5bn (+1%), resp. Epogen sales would not be affected, but another proposed NCD is likely in 2007. They have assumed Epogen will decline by 4%, 14% & 10% in 2007-09, resp.

Despite the decline in Epogen & Aranesp sales, the firm expects 8-11% yoy EPS growth in 2007-09 due to expense control and share repurchase. Amgen shares are trading at 13X 2007 EPS (incl. ESO) & PEG of 1.5 based on 3-year EPS CAGR of 9%. The PE & PEG of drug stocks are 17X & 2.3, resp. GSCO's 12-month target of $72 is based on 16X Amgen's 2008 EPS of $4.50.

- Citigroup notes the proposal was published four months ahead of schedule after last week's FDA advisory panel meeting on the drugs. The scope and timing of the proposal will likely surprise investors and put downward pressure on Amgen.

In Citi's view, these reimbursement proposals could potentially restrict >50% of the CIA market depending on the final decision. The oncology segment represents ~17% of total Amgen?s sales. Thus, they see further downside to the stock relative to their $54 target price and expect Amgen to test the $50 support level.

They are very concerned that the FDA's Cardiorenal Advisory Committee in the fall will further vote to restrict usage of Epogen in the nephrology setting representing approximately 26% of Amgen's total sales. Thus, the firm continues to expect further weakness in the stock until CMS and FDA complete their review of the product labels and reimbursement in the nephrology setting.

Notablecalls: AMGN is down over 3 bucks in early action and I would not be surprised to see the stock hit $52 today. Would pick up some stock there for a bounce, as valuation is still cheap, despite the cuts.