Replies to post #163353 on Biotech Values

[poorgradstudent]

Would you think amgen would be better off buying back another $10b of it's stock or buying Onxx?

Off the top of my head Amgen has bought back somewhere in the area of $20b buying back its own equities over the last 5 to 6 years and I'm not sure it paid off.

Hard for me to say. I have a bias against stock buy backs because I think the money should be used for innovation. Plus I'm admittedly naive to much of the accounting considerations that go into stock buybacks so I don't think I can judge the merits objectively.

What I would say is that if I was an AMGN shareholder, I'd be more inclined to support a purchase like ONXX versus prior ones like MITI / TLRK. Again I might be naive but I'm hard pressed to find out what benefit shareholders received from the TLRK buyout, and development of blinatumomab doesn't seem like it's blazing a rapid path*. So in the ONXX case, it may be a nice change of pace for AMGN investors to get a defined revenue stream rather than their previous experiences with assets that require(d) clinical development prior to any revenues.

[biomaven0]

better off buying back another $10b of it's stock or buying Onxx?

The way to do that comparison is via comparing the resulting EPS over time in the two scenarios. That, in essence, also involves a comparison between the earnings quality of the ONXX revenue stream and the quality of the existing AMGN revenue stream. I think the ONXX assets are actually better quality - less at risk from competition over the next 10 years say. It's worth noting that AMGN's EPO franchise is at substantial risk if Fibrogen's drug (entering large Phase III's now) is ever approved.

Peter