Amgen (AMGN, $62.28, up $1.80) continued its recent hot streak today following Monday’s 12% gain on better-than-expected quarterly earnings and a raised 2008 forecast. There was a lot of action last Friday as traders were positioning for the company’s earnings report. The biggest news, however, wasn’t the company’s numbers so to speak. Late Friday, the company also reported Phase 3 clinical trial results that showed its bone drug, Denosumab, reduced the risk of bone fracture in post-menopausal women.

Amgen reported earnings per share of $1.14 on revenue of $3.76 billion. Net income fell nearly 8% to $941 million but the decline was smaller than expected and overlooked when the company raised its full year earnings forecast. Amgen provided revenue guidance for 2008 in a range of $14.6-$14.9 billion versus Wall Street’s expectations of $14.4 billion. Earnings are expected to be in the $4.25 to $4.45 range versus $4.19 a share which is what analysts were expecting.

The company is counting on Denosumab as its next biggest money-maker over the next few years with analysts predicting sales of $1.7 billion by 2012. The positive results from its latest study could push those numbers higher. As usual, the parade of upgrades on Monday should have been expected. Three brokerage firm raised the stock to a “Buy” rating while another initiated coverage with the same rating. Their price targets were anywhere from $70-$80 a share but the drug will still need FDA approval.

The August 60 calls (YAAHL, $3.15, up $0.75) have provided some stellar gains for those of you who may have bought them on Friday or Monday. However, there was heavy volume in the October 65 calls (YAAJM, $2.85, up $0.70) as nearly 18,000 contracts traded hands. Also noteworthy is the open interest in the October 50 puts which could suggest that option traders are looking to protective their positions as well should Amgen stumble from here.

Rick Rouse
Rick@OptionsMentoring.com