Amgen Inc. (NASDAQ: AMGN) reported earnings yesterday that by and large beat estimates and yet today shares are down 1.6% to $57.20 (12:08 p.m.). The company's revenues were unchanged from last year's quarter at $3.61 billion, beating Wall Street estimates of $3.58 billion. Adjusted earnings per share (excluding options expense) increased 4% to $1.08, beating estimates by a nickel.

Amgen makes drugs to help patients with their fight against cancer, kidney disease, rheumatoid arthritis and other serious illnesses. The problem is that sales of two of its products, anemia drugs Aranesp and Epogen, which make up 40% of revenue, declined 23% and 5% respectively. The reasons are twofold: 1) a study earlier this year suggested that the drugs are overused and linked to an increased risk of stroke and heart attack; 2) new insurance-coverage restrictions from Medicare. The private sector is following the public one here as already the use of these was 30-40% lower in that sector as well.

Sales in the U.S. declined 2% compared with last year, but international sales grew 12%. Still, 7% of this was mostly attributable to favorable exchange rates. Another saving grace was combined worldwide sales of Neulasta and Neupogen that increased 10%, while sales of rheumatoid arthritis drug Enbrel grew 16%. Guidance was also muted.

Analysts coverage on the world's largest biotech company by sales is abundant with mostly hold ratings. One analyst, Michael Aberman of Credit Suisse, yesterday raised Amgen to Outperform from Neutral and the 12-month price target to $65.00 per share. Others, however, voiced their concerns following the earnings report with Lazard Capital Markets analyst Joel Sendek issuing a Sell.

Adam Feuerstein of TheStreet.com explains the reasoning for Sendek's call and why he agrees with the call. Basically, with an average 7% growth rate going forward, a 14 p/e multiple seems high. The bearish sentiment rests on seeing sales further declining following the new FDA guidelines as well as Medicare's lower reimbursement rate for several of Amgen's best sellers.

I can understand where Sendek is coming from, but I can't help but feel he may be ignoring Amgen's pipeline and the importance of of its drugs. I'd probably stay away from Amgen myself now, but keep a close watch on any positive developments. The stocks is down 16% so far this year, and 23% over the last year. It may be that the bad news has been priced in and that with its recently announced restructuring it is likely rebound nicely with some good news.

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