Amgen Inc.'s (AMGN) positive news about the experimental bone drug denosumab is lifting the long undervalued stock to its highest level this year, and more gains are possible despite lingering issues at the biotech company.

Amgen shares rose by as much as $8.72 Wednesday, reflecting the potential for billions of dollars in additional denosumab sales based, in part, on the trial data released Tuesday. The data showed the drug's superiority to a rival in preventing complications related to the spread of cancer to bones.

Before the denosumab data, Amgen shares had been weighed down by safety issues related to its anemia drugs; concerns about the growth trajectory for the arthritis treatment Enbrel, sold with Wyeth (WYE); and the company's particular exposure to looming health-care overhaul.

Those issues still remain. However, the positive denosumab data put the company's future in a brighter light, even if the data may not lead to denosumab sales for that specific indication for more than a year.

"This gives you something positive to think about," Robert Baird & Co. analyst Christopher Raymond said. "This company was purely a defense story for the past two years."

An Amgen spokeswoman said that the company is pleased with the results of the study.

Even with its gains - Amgen shares rose 15.1% to $60.10 in recent trading - the stock trades well below other large biotechs, at 13.4 times projected 2009 earnings, according to FactSet Research. By comparison, Genzyme trades at 16.7 times and Celgene's multiple is 24.7.

"Even at these levels, it is not really expensive," said Les Funtleyder, an analyst with Miller Tabak.

Amgen shares can rise further as confidence increases in the company's future earnings growth, analysts said.

Potential denosumab sales may become clearer beginning in October, with its expected approval from the Food and Drug Administration. However, that approval is for treating only osteoporosis and bone loss caused by hormone treatment in patients with breast or prostate cancer. Sales for those indications are expected to grow slowly as the drug enters a competitive market dominated by Big Pharma and generic alternatives.

The larger opportunity is denosumab's use in preventing skeletal complications in cancer, but approval may not come until late 2010, or even 2011. Two additional studies in the area will be released before early 2010.

Raymond doesn't expect cancer doctors to use the drug off-label if it becomes available in October. Off-label use is common for drugs that fight cancer, because patients often don't have any other options.

"I would be surprised if it got off-label use in supportive care," Raymond said.

Amgen noted that it would never promote any off-label use for any of its drugs, and highlighted that denosumab isn't yet approved by regulators.

Amgen's other franchises also face pressure, which is a possible source of concern when the company reports second-quarter results later this month.

Sales growth of the anemia drugs, Epogen and Aranesp, began evaporating in 2007 when studies showed a link to risks of cardiovascular disease, cancer progression and death. Those drugs could come under further pressure as Medicare and Medicaid are expected to eventually reimburse physicians at a flat rate for dialysis care, rather than pay for individual drug use.

In addition, Amgen could be targeted by government health-care overhaul, since Medicare pays enormous amounts of money for Epogen, which had 2008 sales of $2.5 billion.

Biologic drugs like Epogen have no generic competition, but future legislation may provide such a path. The large government spending on the anemia treatments may make them an initial target. Drug makers, including Merck & Co. (MRK), have indicated they hope to enter the market with copycat versions.

Sanford Bernstein analyst Geoffrey Porges is bullish on denosumab and Amgen's stock price, but still has concerns about the company.

"We believe Amgen's core business is largely mature and is likely to stay relatively flat in the coming years with competitive challenges looming for Enbrel, Neupogen, Epogen and Aranesp," Porges wrote in a note to clients.

-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com