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Peridot Capital Management LLC

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Based in Seattle, WA
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Peridot Capital Management LLC

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Amgen Report Could Prompt Closing of Genentech Gap

July 20, 2005 Chad Brand, Peridot Capital Management LLC
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The 2nd quarter earnings report from biotech giant Amgen (AMGN) issued Tuesday night was a blowout, no question about it. With much of the biotech acclaim going to Genentech (DNA) in recent years, AMGN has flown under the radar and now investors are clamoring to catch up. In fact, the stock is up $10 today to $80 per share. However, even with today's run-up does Amgen still represent relative value in the biotechnology sector?

I would have to answer "yes" to that question, even though I would wait for a dip before buying any shares. Genentech trades at 52 times 2006 earnings against just 22 times for Amgen. Not to say that these multiples should be identical, but such a discrepancy most likely reflects an overly optimistic view on DNA and fairly lackluster sentiment surrounding Amgen. I see no reason why Amgen should garner less than 25 times earnings given its strong drug pipeline and 15% growth rate.

In healthcare
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Peridot Capital Management LLC is a registered investment advisor in the states of Maryland, Texas, and Washington. The firm may not transact business in states where it is not registered or exempted from registration. In most states, the firm is exempt from registration if it has fewer than six clients who are residents of that state. As a result, Peridot Capital Management LLC is free to provide services to residents of every state and applies for registration as required. Individualized responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.

The content published on our blog represents the opinions of Mr. Brand and he and/or his clients may hold positions in securities discussed. Such positions will be disclosed at the time of publication, although subsequent changes to those positions will be made without notification. The information contained in blog posts is believed to be accurate when published, however, mistakes could be made. As a result, do not rely on the content exclusively for your investment due diligence. The commentaries published do not constitute investment advice, as readers’ personal investment goals and risk tolerances will dictate which investments are appropriate for them. Our blog is meant to be one of many sources for readers to conduct their own research into specific investments. Consult an investment professional before acting solely on information found on this site. If you do not have an investment professional to work with, you may contact Peridot Capital Management LLC directly.