Re-Load AMGN Calls

An Earnings Play

By Bryan Bottarelli
Tuesday, October 21, 2008 1:27 PM EDT
Tue, 21 Oct 2008 17:27:00 GMT

PLAY: Once again, buy the AMGN November 50 Calls (AMQ KJ) at or under $5.00, good for the day. Place a protective stop limit at $3.10 and a pre-determined sniper sell at $7.50.

Dear Bottarelli Research Member,

As you know, we successfully played upside calls on biotech giant Amgen (AMGN – NASDAQ), which resulted in a quick 25% gainer. But as I look at the chart formation today, I think we have another opportunity to buy into today’s price dip, especially going into the company’s earnings announcement tomorrow at 4:30 PM ET.

AMGN

The overall view is that despite a slide in Aranesp sales, Amgen will either meet or come close to meeting expectations. Analysts expect a profit of $1.08 per share on $3.7 billion in revenue, with the full year coming in between $4.25 and $4.45 per share on revenue between $14.6 billion and $14.9 billion.

In a recessionary environment, I consider these strong results. But AMGN’s wild card could be their osteporosis drug candidate denosumab, which has blockbuster potential. In July, a late-stage study showed that denosumab was more successful than placebo at building bone density in men undergoing hormone therapy. And then another late-stage study showed that denosumab reduced the incidence of fractured vertebrae in postmenopausal women. With these results, some estimate that the drug could be worth over $1 billion in annual sales.

At the same time, Amgen also received approval in August for Nplate, which treats a blood-clotting disorder that causes the body to attack its own platelets. This condition affects 140,000 people in the U.S. and Europe. Both of these could help Amgen boost guidance going forward — which is something that Wall Street absolutely loves to hear. Therefore, I’d like to once again play the Amgen November 50 Calls (AMQ KJ). Right now, you can pick them up for $4.80 per contract. Let’s re-load this position now!

PLAY: Once again, buy the AMGN November 50 Calls (AMQ KJ) at or under $5.00, good for the day. Place a protective stop limit at $3.10 and a pre-determined sniper sell at $7.50.

At the same time, maintain your ICE November 90 Calls (ICE KR), WFT November 15 Calls (WFT KC), DIA November 90 Puts (DAV WL), and HIG November 30 Puts (HIG WZ). And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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