The Zacks Analyst Blog Highlights: Amgen, Eli Lilly, AstraZeneca, Goldman Sachs Group and State Street

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Aug 14, 2012, 09:30 ET

CHICAGO, Aug. 14, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Amgen (Nasdaq:AMGN), Eli Lilly (NYSE:LLY), AstraZeneca (NYSE:AZN), The Goldman Sachs Group Inc. (NYSE:GS) and State Street Corporation (NYSE:STT).

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Here are highlights from Monday's Analyst Blog:

Pipeline Setback at Amgen

Amgen (Nasdaq:AMGN) recently suffered a pipeline setback with the company deciding to halt the development of its oncology candidate, ganitumab (AMG 479).The decision was based on the recommendation of an independent Data Monitoring Committee (DMC).

The randomized, multicenter, double-blind, phase III study (GAMMA) evaluated whether the combination of AMG479 and Eli Lilly's (NYSE:LLY) Gemzar improved overall survival in patients suffering from metastatic adenocarcinoma of the pancreas versus placebo and Gemzar, as a first-line therapy.

However, after conducting a pre-planned interim analysis of the data, the DMC concluded that the combination of AMG479 and Gemzar would not be likely to improve the survival in patients compared to Gemzar plus placebo. However, the DMC's analysis of the data from the phase III study did not raise any safety concern(s).

In addition to the GAMMA study, Amgen also decided to halt a phase II study which was evaluating AMG479 in patients suffering from locally advanced pancreatic cancer.

Though disappointed with the discontinuation of the phase III study of AMG479 in the pancreatic cancer indication, we are encouraged by the deep pipeline at Amgen, which represents significant commercial potential. Moreover, Amgen's efforts to expand the label(s) of its marketed products such as Prolia/Xgeva, Sensipar, Vectibix and Aranesp also encourage us.

Our Recommendation

We are pleased with the strong performance of Amgen in the first half of 2012. We believe that drugs such as Enbrel (arthritis and psoriasis) should continue performing well in the coming quarters. Management too raised its guidance for 2012, while releasing the second quarter 2012 earnings results.

The company now expects earnings in the range of $6.20 - $6.35 per share on revenues of $16.9 - $17.2 billion. Earlier, Amgen had guided toward earnings of $5.90 - $6.15 per share on revenues of $16.1 - $16.5 billion. Earnings guidance reflects the up-front and milestone payments received from Takeda, AstraZeneca (NYSE:AZN) and Astellas Pharma in the first half of 2012.

We currently have a Neutral recommendation on Amgen. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

Goldman to Divest Japanese Homebuilder

The Goldman Sachs Group Inc. (NYSE:GS) is selling Fujita Corp. to Daiwa House Industry, according to a Reuters report. The deal comes on the heels of Goldman's departure from its investments in Japan.

The deal penned with Daiwa, a Japanese home builder, will fetch Goldman 50 billion yen ($636 million). It had acquired Fujita in 2008 with investments of 45 billion yen that were made in two phases.

Following the burst of the bubble economy in Japan in the early 1990s, a number of foreign investors had forayed in the country with Goldman being one of the most aggressive. In particular, distressed companies were targeted and their businesses were turned over. This helped Goldman achieve capital gains.

However, lately the company is disposing those assets, partly or completely, and roping in millions. Last year, Goldman offloaded 45% of its stake in Accordia Golf, a golf course management company. It had invested in the company way back in 2002 and took it public in 2006.

Currently, it is left with two chief investments in Japan including USJ Co. that runs Universal Studios Japan in Osaka. The company also has a stake in a mobile phone operator named eAccess.

Concurrent with the second quarter 2012 earnings release, Goldman announced the divestment of Goldman Sachs Administration Services, a leading hedge fund administrator to State Street Corporation (NYSE:STT). The cash deal was valued at $550 million, subject to certain adjustments. The deal is anticipated to close early in the fourth quarter of 2012.

Over the long haul, we believe that Goldman's fundamentals remain highly promising with a diverse business model and a strong balance sheet. Strategic sales would also rope in billions and help increase its financial flexibility. From the risk perspective as well, it is assured that the company would be able to withstand another financial crisis as Goldman cleared the severest stress test.

Goldman currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a 'Neutral' recommendation on the stock.

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