Valuing DNDN today to the Amgen of today is not a fair comparison. Amgen's explosive growth is behind it - DNDN's is just dawning. So, although the market environment may never be quite what it was during Amgen's best years, I think it's useful to look at what those years looked like when we try to value our own company.

 

In the Spring of 2001, Amgen's P/E ration was 55. You heard me right - 55. http://www.fool.com/portfolios/rulebreaker/2001/rulebreaker010430.htm

Actually, it rose above 60 at some point if memory serves me right.

 

Deutsche Bank has estimated that DNDN could earn upwards of $1.8 billion (Provenge alone) once peak annual sales are reached.http://www.investorvillage.com/smbd.asp?mb=971&mn=302608&pt=msg&mid=7961055. It wasn't stated, but I suspect that's 3-5 years out max.

 

We know COGs will be down around 20% by then. Let's assume after taxes, R&D, sales, A&G, pipeline, etc. that profits are only 40% of that. Brings us down to $720  million. Divide by 110 million shares, that's $6.50/sh (rounded). If you assume only half of Amgen's peak P/E ratio, that's $175/sh.

 

And that ignores ROW. That ignores ADPC. That ignores the pipeline. That ignores acquisitions. None of which are valid to ignore. Assume Amgen's P/E - something at least history has suggested as reasonable - and, well....you get double that. :-)

 

$30/share? I don't think so.

 

~ yanqui