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Last Monday was R&D day for Amgen and that should have provided the company an

opportunity to show case itself as a company with attractive long-term growth prospects.

Unfortunately, the reception fell flat. Amgen’s shares gave up all of their gains for the past year,

and traditional fundamental analysis doesn't explain why. The company is the world's largest

biotech company, the company holds three blockbuster drugs of revenues greater than a billion,

has been profitable since 1991, and boasts a cash balance of over $5 billion. Yet, the stock has

performed worse than some unprofitable biotech companies that don't have a single product on

the market.

Apparently, Wall Street is worried about Medicare reimbursement and has concerns that Amgen’s

pipeline isn’t overflowing with products in late-stage development, causing investors to fret about

Amgen’s future growth despite the fact that the company has said its 2005 earnings and revenue

should be consistent with its annual growth projections through 2005. The company expects

earnings of $2.71 per share to $2.85 per share next year on an adjusted basis, excluding items,

and revenue of $11 billion to $11.5 billion.

More recently, Amgen said on March 29, it will acquire the roughly 80 percent of Tularik that the

company does not already own for $1.3 billion in an all-stock deal. The acquisition gives Amgen

access to technology designed to treat cancer and inflammatory diseases by regulating genes.

The deal is expected to close by the second half of the year. With the Tularik’s acquisition,

Amgen said it expects 2004 earnings of $2.30 per share to $2.40 per share and revenue of $9.7

billion to $10.4 billion. Wall Street liked the news and gave Amgen “thumbs up” on the acquisition

as the company continues to find ways to fuel its pipeline.

Tularik's gene-regulation technology focuses on selectively blocking the cascade of chemical

reactions in the body that can cause diseases, including inflammation, which has been

increasingly linked to major illnesses such as cancer, arthritis and heart disease. We believe the

acquisition bodes well with Amgen. As we had said in our February 2004 report, if all goes well in

Tularik’s pipeline, 2004 should prove to be an interesting and rewarding year for Tularik.

Amgen has several programs that, which target multi-million dollar indications and should attract

investors’ attention. These include an antibody, AMG-162 that could enter Phase III trials later

this year for osteoporosis, BVT 3498 in Phase II clinical trials targeting a novel pathway for

diabetes, AMG-531 a platelet-stimulating drug in Phase II, and AMG-548, a novel antibody

targeting inflammation in Phase II.

We believe that Amgen trades at a reasonable valuation and that clarity on Medicare

reimbursement will create upside potential. Increase sales of Enbrel for psoriasis and Aranesp,

will help the company meet its earnings guidance in the next 12 months. We continue to rate

Amgen as a "buy" with a price target of $80. And for Tularik, given its current valuation, we rate it

as a hold/sell.