As to valuing biotechs with no profit.... There would never have been a biotech industry if the companies needed profit before they could IPO. The nature of capitalism is that people put money at risk, based on the hope/expectation of gain.
Jeeze, Jon, I wish I had bought Amgen when the stock price was going through the roof with its first product and no profit. Rick Harmon has commented on this many, many times. I remember him talking about owning Amgen in the single digits "pre-split, pre-split, and pre-split". As I remember, each of those splits was 3:1.
My memory is overcrowded and super-annuated, so I looked up Amgen's valuation history in Value Line. In 1985, AMGN's market cap ranged from $64mm to $220mm. If you bought and held at any time during that year, your minimum return would be 218 times your investment, and perhaps as much as 600 times. A few thousand bucks back then would have made you wealthy now. |
