Monday, December 17, 2001
Size vs. Innovation
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.