Size vs. Innovation

Mega-biotech multiples

Profitable biotechs trade at a higher multiple than pharma companies based on the expectation that they will have faster sales and earnings growth. As biotech companies approach pharma in size, they risk picking up the attendant liabilities of all large organizations: bloat and inertia. Amgen Inc., the largest biotech company - which would be still bigger if it acquires Immunex Corp. - is a test case.

At this point, Street watchers see no need to worry yet. With two new product launches of its own and a third product from IMNX with room to grow, AMGN should have no trouble maintaining the growth rates that justify biotech multiples for at least the next few years.