Amgen Goes to Turkey, Loses Biotech Cred

BOSTON (TheStreet) -- Amgen (AMGN) is saying "elveda" to the biotech sector.

That's Turkish for "goodbye." With the $700 million purchase of Turkey's Mustafa Nevzat Pharmaceuticals, a maker of generic drugs, Amgen's claim as "the world's largest biotech company" no longer holds much meaning.

Amgen has graduated to become a "pharmaceutical company" joining the ranks of Merck (MRK), Bristol-Myers Squibb (BMY) and Pfizer (PFE).

"When you buy a generics company, it's not a biotech," says J.P. Morgan biotech analyst Geoff Meacham. "You have then shifted the focus from innovative products for specialty markets to marketing breadth for a wider audience i.e. a pharma."

But Meacham will continue to cover Amgen, illustrating the increasingly fuzzy divide between what investors consider pharmaceuticals and biotech. The differences between the two camps today have become more a matter of semantics than science.

Traditionally, a biotech company was one that genetically altered living organisms -- animal cells mostly -- to produce biological, or protein-based, injectable drugs. Pharmaceutical companies, on the other hand, used chemical processes -- akin to a well-defined chemical recipe -- to produce drugs, often in pill form.

Rules are always made to be broken, even in biotech. Gilead Sciences (GILD) doesn't use a biologic process to manufacture its HIV drugs, but investors consider the company to be a biotech bellwether, along with Biogen Idec (BIIB) and Celgene (CELG) (whose leading cancer drug Revlimid is also a pill.)

The death of George Rathmann, Amgen's first CEO, is a reminder that the company's DNA is grounded in biotech. Amgen developed two of the most successful biologic drugs in history -- the anemia drug Epogen and Neupogen, which treats chemotherapy side effects.

Yet Amgen is also a victim of its success. With annual revenues of $15.5 billion last year, meaningful top-line growth has become harder to achieve. Amgen continues to grow earnings year over year but needs the assistance of cost cuts and financial engineering to do so. Last year, Amgen became the first "biotech" firm to pay shareholders a dividend. Drug patent cliffs and the subsequent loss of revenue, once a worry only of pharmaceutical companies, is now also an issue Amgen is confronting.

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