Anemic Growth in All the Right Places

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Investors appear underwhelmed by Amgen's (NAS: AMGN) analyst-beating and guidance-raising third quarter -- shares were down as much as 4% today -- but that seems like a bit of an overreaction to me.

Sure, red-blood-cell boosters Aranesp and Epogen are hurting -- down 4% and 27% respectively -- but they're no longer the driving force for the biotech. Despite the declines in the anemia drugs, overall sales came in 2% higher excluding favorable currency exchange rates.

Neulasta and its older brother Nupogen, which combined occupy Amgen's top-selling spot, rose 6%. In second place, Enbrel, which Amgen sells with Pfizer (NYS: PFE) , was up 1%. Enbrel isn't having the run that Abbott Labs' (NYS: ABT) Humira and Johnson & Johnson (NYS: JNJ) and Merck's (NYS: MRK) Remicade are on -- up 18% and 14% in the third quarter on a constant currency basis, respectively -- but considering the gains by the competitors, I'd say anything higher than a decline is a positive.

Amgen's future lies with its newest drugs Prolia and Xgeva. While sales remain small compared to the top sellers, they seem to be ramping up nicely. Sales of Xgeva in the third quarter were nearly equal to the first and second quarters combined. Prolia sales are still fairly small -- $51 million in the quarter, half of where Xgeva is despite being launched first -- but that's to be expected. Osteoporosis, which Prolia treats, is a much more crowded market than bone sparring treatments for cancer patients, where Xgeva's only real competition is Novartis' (NYS: NVS) Zometa.

Most importantly, Amgen remains a cash-generating machine. The biotech instituted a dividend this year and still has money left over. It repurchased $2.4 billion worth of stock last quarter and yesterday announced that the board had upped its repurchase program to a total of $10 billion.

Amgen is in a rebuilding period -- don't expect double-digit revenue gains in the near future -- but there are plenty of reasons to be positive about the long-term future for the company.

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At the time this article was published Fool contributorBrian Orelliholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Abbott Laboratories and Johnson & Johnson.Motley Fool newsletter serviceshave recommended buying shares of Pfizer, Johnson & Johnson, Abbott Laboratories, and Novartis, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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