Amgen Inc (AMGN) Valuation

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Company Profile (obtained from Google Finance): Amgen Inc. is a biotechnology company that discovers, develops, manufactures and markets human therapeutics-based on advances in cellular and molecular biology. The Company operates in human therapeutics. It markets human therapeutic products in the areas of supportive cancer care, nephrology and inflammation. Its principal products include Aranesp (darbepoetin alfa), EPOGEN (Epoetin alfa), Neulasta (pegfilgrastim), NEUPOGEN (Filgrastim) and Enbrel (etanercept). Aranesp and EPOGEN stimulate the production of red blood cells to treat anemia and belong to a class of drugs referred to as erythropoiesis-stimulating agents (ESAs). On January 4, 2008, the Company completed the acquisition of Dompe Biotec, S.p.A.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 4/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
3. Earnings Stability – positive earnings per share for at least 5 years – PASS
4. Dividend Record – currently pays a dividend – FAIL
5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

• Last Updated    12/21/2009
• MG Value    $141
• MG Opinion    Undervalued
• Value Based on 3% Growth    $53
• Value Based on 0% Growth    $31
• Market Implied Growth Rate    3.47%
• Net Current Asset Value (NCAV)    $1.86
• PEmg    15.44
• Current Ratio    4.07
• PB Ratio    2.52

Key Data:

Balance Sheet – 9/30/2009

• Current Assets    $19,974,000,000
• Current Liabilities    $4,903,000,000
• Total Debt    $10,536,000,000
• Total Assets    $40,940,000,000
• Intangible Assets    $2,674,000,000
• Goodwill    $11,335,000,000
• Total Liabilities    $18,082,000,000
• Outstanding Shares    1,016,000,000

Earnings Per Share – Diluted

• 2009 (estimate)    $4.63
• 2008    $3.90
• 2007    $2.82
• 2006    $2.48
• 2005    $2.93
• 2004    $1.81
• 2003    $1.69
• 2002    -$1.21
• 2001    $1.03
• 2000    $1.05
• 1999    $1.02

Earnings Per Share – Modern Graham

• 2009 (estimate)    $3.67
• 2008    $3.06
• 2007    $2.54
• 2006    $2.11
• 2005    $1.70
• 2004    $1.02

Valuation History:

• 12/21/09 – Value $141, Actual Price $56.73, Undervalued & Enterprising
• 9/10/09 – Value $140, Actual Price $59.04, Undervalued & Enterprising