Leading biotech drugmakers Amgen
The parties didn't disclose the payment, but I figure it to be somewhere between $64 million and $102 million. Here's why: Amgen said it will record a charge in Q3 and expects it to be less than $0.05 a share. With 1.28 billion basic shares outstanding, that implies a charge -- and a check -- for $64 million, or less than 1% of Amgen's trailing 12-month sales. A mosquito bite.
Meanwhile, Genentech reports it will record a $0.20 increase in EPS for 2003. Using the company's 513 million basic shares, that suggests about $102 million, or over 3% of $3.1 billion in sales for the last four quarters. Nice.
For good reason, Amgen and Genentech are the most respected in the biotechnology world. With a little luck in patent disputes and settlements with giant Johnson & Johnson
Genentech has an astonishing capital-allocation knack for partnering with other biotech drugmakers for drugs that secure FDA approval at much higher than the 10%-20% success rate of drugs that enter human trials.
Both stocks have been driven to the biosphere on increased sales from new products and the prospects for upcoming drugs. Perhaps the future will justify today's enterprise-value-to-free-cash-flow multiples: 80 for Genentech; the low 40s for Amgen. But at today's prices, neither stock offers investors a margin of safety.
Shares of each company were off slightly in morning trading.