Analyst Picks and Pans: Amgen, RF Micro, Chattem

Amgen (AMGN)Thomas Weisel Partners reaffirms overweight William Blair & Co. reaffirms outperform

Thousand Oaks, Calif.-based Amgen said on July 7 that its experimental osteoporosis drug denosumab met a key goal of preventing bone injuries in breast-cancer patients during a late-stage study. Amgen said denosumab outperformed rival product Zometa, which is made by Novartis AG (NVS), in the study. Denosumab is being viewed by Wall Street as the company's next blockbuster and a much-needed product to reinvigorate revenue.

The latest study adds to the already-positive results achieved in clinical trials involving postmenopausal women. The company is seeking approval for both indications and is scheduled to meet with a Food and Drug Administration panel on Aug. 13 to review its marketing application. The FDA is scheduled to make a decision by October.

The recent results from the study involving 2,049 patients bolstered an already-positive outlook by most analysts.

On July 8, Thomas Weisel Partners analyst M. Ian Somaiya reaffirmed a overweight rating and raised his price target to $71 from $62, while brushing aside some concerns about the lack of safety data provided by the company. A concern for osteoporosis drugs is a side effect called osteonecrosis of the jaw, where the blood supply is cut off to an area of bone, therefore weakening the bone.

The company did not provide specific rates for either denosumab or Zometa patients in the study, but said they were consistent with prior results.

"Though a significant difference in osteonecrosis of the jaw would have been a home run, we believe that superior efficacy will be enough to drive additional (denosumab) front-line use," Somaiya said, in a note to investors.

Also on July 8, William Blair & Co. analyst John Sonnier reaffirmed a outperform rating, but raised some concern about the osteonecrosis of the jaw rate.

"That said, we believe the drug has a favorable risk-reward profile and that superior efficacy and comparable safety with more convenient administration will encourage adoption," he said, in a note to investors.

RF Micro Devices Inc. (RFMD)Oppenheimer & Co. raises price target

RF Micro Devices Inc. may top expectations for the quarter ended in June, according Oppenheimer & Co. analyst Ittai Kidron, who pointed to market share gains among the chip maker's handset customers in a July 8 note.

Kidron raised his price target for the stock to $5 from $4. He hiked his earnings estimate by a penny to 2 cents per share and sales to $194.7 million from $186.1 million.

Kidron said even his own sales estimate could prove overly conservative given market shares gains at Samsung and Nokia. RF Micro, based in Greensboro, N.C., sells both companies semiconductors for handsets.

"Coupling this with strong expense management and a bounce-back in gross margins, we see good earnings leverage and are raising our estimates ahead of consensus," Kidron said.

Chattem Inc. (CHTT)Jefferies & Co. downgrades to hold from buy

Jefferies & Co. analyst Douglas M. Lane downgraded shares of toiletries and dietary supplements maker Chattem Inc. on July 8, citing concerns over a slowdown in sales.

Chattanooga, Tenn.-based Chattem's products include medicated skin care products such as Gold Bond, Cortizone-10, and Balmex, along with topical pain products Icy Hot and Aspercreme. It also makes the medicated dandruff shampoo Selsun Blue and dietary supplements.

Lane reaffirmed a price target of $72. In a note to clients, he wrote sales seem to have fallen in June.

"This compels us to reduce estimates, and with the stock within 8 percent of our target, to move to the sidelines pending reacceleration of point-of-sales," he wrote in a note to investors.

Lane also cut his fiscal 2009 earnings-per-share outlook to $4.50 from $4.60.

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