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Stock Analyst Update

Immunex Delivers Another Quarter of Impressive Earnings Growth

But the stock isn't exactly a bargain.

The news from Immunex (IMNX) is bright, but such a promising company doesn't come cheap.

The Seattle-based biotechnology firm reported earnings of six cents per share Tuesday, beating the consensus estimate by a penny. In all, net income rose more than 100% to $32.2 million, up from a mere $300,000 in the first quarter of 1999.

The primary driver of Immunex's impressive growth is Enbrel, its rheumatoid-arthritis (RA) drug. Enbrel is currently approved to treat RA patients that have failed other therapies such as methotrexate. It has proved very efficacious and has provided the large population of late-RA sufferers a much-needed therapeutic alternative.

And Enbrel's potential-patient population may be much larger than originally thought. Just last week, a Food and Drug Administration advisory panel unanimously recommended that Enbrel be approved for early-stage rheumatoid arthritis. Such a move could significantly add to the number of people who can be prescribed the drug. What's more, Enbrel is also being tested in congestive heart failure patients, which could expand the drug's labeling even further.

But a lot of the optimism surrounding Enbrel has already been priced into Immunex's stock. The company's shares trade at about 180 times its 2000 estimated earnings, and that's after a 42% decline from the stock's high.

Certainly, if Enbrel continues to deliver such impressive clinical-trial data, it could develop into one of the first true biotechnology blockbusters. In that sense, Immunex is a less speculative investment than many young biotech companies. But with its stock price flying so high, investors need to be prepared for steep falls when the biotech sector stumbles or if Immunex delivers even a hint of bad news.