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Stock Analyst Update

Valuation Is the Rub with Immunex

Biotechnology firm delivers impressive earnings, but it's no bargain.

Immunex (IMNX) is a biotechnology investor's dream, but it carries an awfully big price tag.

The biotech firm announced another quarter of solid earnings after the market closed Wednesday. Immunex reported earnings of $0.08 a share, a penny above consensus estimates.

Most important, the company reported that sales of rheumatoid arthritis drug Enbrel reached $155.1 million in the second quarter, up 18% from the first quarter and at the upper end of analysts' estimates for the current period.

Enbrel has quickly become one of the most important new biotechnology drugs on the market. It was originally approved to treat later-stage rheumatoid arthritis but recently received a label expansion to include early-stage patients, as well. Such an expansion significantly increases Enbrel's potential market and could drive continued growth in the product.

Moreover, Enbrel is in clinical trials for a number of other indications, including congestive heart failure--another very large potential patient base.

Optimism over Enbrel has led investors to bid up Immunex's shares to stratospheric levels. The stock is currently trading about 200 times its estimated earnings for 2000, easily making it one of the most expensive of the big biotech companies.

There's probably no reason for Immunex stockholders to sell their shares. But for those who are considering buying in, it makes sense to wait until the current round of biotech mania cools a bit, rather than purchasing shares when they're trading at such heady multiples.