Has The Street Misdiagnosed Immunex?

Although Immunex thinks it scored a giant victory in March when the Food & Drug Administration approved the marketing of its first product, GM-CSF, investors didn't quite see it that way. Immunex's stock began to head south--slumping from 59 to 43 on July 9. Some big players worry that the new bio-engineered drug, trademarked as Leukine, won't be able to compete with a widely used Amgen product. But not everyone shares their concern: Investment manager Bill Harnisch has been buying, building up a 12% stake in Immunex recently.

"Immunex's drug is very much misunderstood and belittled by the Street," says Harnisch, the president of Forstmann-Leff Associates. Leukine spurs the growth of infection-fighting white blood cells that are destroyed during cancer therapy, specifically bone-marrow transplants--for which the FDA approved the drug.

Amgen's CSF (colony-stimulating factor) is G-CSF, known as Neupogen, which the FDA approved in February for the broader treatment of infections associated with chemotherapies that supress white-blood-cell production. Some big investors maintain that Neupogen will knock Leukine out of the market. Not true, says Harnisch, who thinks the CSF market "is much too broad to worry about competition." He figures that it will grow into a $1.5 billion business over the next five years, with Amgen and Immunex both deriving big profits.

In the red since 1982, Immunex should earn 44~ a share this year, says Harnisch. As more doctors and hospitals use Leukine in treating cancer patients, he expects profits to jump to $1 a share next year, reach $2.10 in 1993, and hit $5 by 1995.

BROAD CONSENSUS. Stuart Weisbrod, a first vice-president at Merrill Lynch, agrees that Immunex will get more than a toehold in the CSF market. He bases his conclusion on the results of a survey of 4,400 oncologists. His survey shows that both drugs are considered effective by these cancer specialists, with no material difference discerned between the two. And both are being used as adjuncts to chemotherapy and bone-marrow transplants, says Weisbrod. He estimates that Amgen will initially garner 75% of the market, with Immunex taking the rest. A third CSF product, developed by Schering-Plough and Sandoz, is expected to be on the market by late 1992. But Weisbrod expects it to have some difficulty cutting into the market shares garnered by Amgen and Immunex.

Peter Drake, an analyst at Vector Securities International, is also bullish on Leukine's prospects and expects Immunex's stock could hit 55 to 60 in the next 12 months.

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