Gilead Sciences 'Pushes Out' Amgen As Number 2 Biotech

Investors now think that a biotech company with less than one-third the revenue of Amgen (AMGN) is worth more than the former sector king.

Elizabeth Trotta at TheStreet.com took note of this late last week but I thought it was worth pointing out.  Gilead Sciences (GILD) has overtaken Amgen as the world's second most highly valued biotech. Genentech (DNA) is the commanding number one with a market cap of more than $83 billion. It's a little nip and tuck between GILD and AMGN, but as I write this Amgen's market cap stands at approximately $43.5 billion and Gilead's at $45.5 billion. Amgen is still tops when it comes to revenue: $14.8 billion in 2007 versus Genentech's $11.7 billion and Gilead's $4.2 billion.

There's a lot of analyst commentary rolling out regarding the potential impact of the pending court decision on Roche launching a competitor to Amgen's anemia drugs in the U.S. AMGN shares fell about 10 percent last week to a new multi-year low on that fear. But this morning Cowen and Co. biotech analyst Eric Schmidt writes in a research note to clients, "We expect Amgen shares to recover as investors gain conviction that Amgen will continue to benefit from its intellectual property on (the anemia drugs)."

But Rodman & Renshaw's Mike King in a note to clients this morning writes that there's more than the judge's ruling is weighing on the stock. "We expect continued share pressure and are maintaining our Market Perform rating at least until the FDA renders its final decision on the Aranesp restrictions (in cancer patients)....," King says. The agency is expected to issue its ruling in around 30-45 days or so. R&R and Cowen make a market in AMGN.

Comments

[Ron Rader:]

Note, I do not consider Gilead to be either a biotech or biopharmaceutical company. Biotechnology involves the use of live organisms for the manufacture of inherently biological-type products. Biotech as used here and by many others use is a vague, never defined, metaphor or reference to high-tech life sciences-based companies and research. Small molecule drugs and related R&D are neither biotech nor biopharmaceutical! Along these lines see my two-part series, "What is a Biopharmaceutical?, published in BioProcess International, with links to this at www.biopharmacopeia.co.... And, this is the approach used in my book/database, Biopharmaceutical Products in the U.S. and European Markets (see biopharma.com).

Although it is incredibly common, particularly in the financial community and press, to view biotech as being based on business models (rather than marketed products, which is how industries have always been defined) and/or gee-whiz, that's neat-type views of industry, I have yet to see any usable definition or explanation of how to apply this. Most analysts I've spoken use a completely subjective 'if it seems or can be hyped as high-tech and it involves the life sciences, it's obviously biotech' approach, with just about every pharmaceutical company meeting this criteria. For this reason, just about all financial industry analyses of the biotech and biopharmaceutical industries are useless, if not misleading, including the most well-known and presumed authoritative annual reviews/studies, with criteria unset and varying depending on the year (or is it time of day, mood of the analyst, etc.) and often manipulated to meet the analyst's preconceived, often theme-based, conclusions.

As far as I am aware and I followed Gilead for 15 years, from its very start, as Editor, Antiviral Agents Bulletin, Gilead has no substantive involvement with biotechnology, with its R&D based on medicinal chemistry, and its products being synthetic small molecule drugs. Comparing Gilead to Amgen is like comparing apples and oranges--yes, they are both fruits (and pharmaceutical companies) but these companies' products, the manufacture and underlying nature (biological vs. chemical) of their products, their associated manufacturing infrastructure, the expertise of their staff, etc., are very different.

It would be accurate to say that Gilead has now overtaken Amgen as the largest non-Big Pharma-type pharmaceutical company, or the largest biotech-type company, presuming that one actually defines or makes it clear that biotech in this context involves innovative, entrepreneurial, started-from-scatch, gone from private to public-type companies.

2008 Mar 28 03:49 PM