Amgen-Immunex Deal Needs to Start Making Sense

Now that Amgen (AMGN Quote)appears very close to acquiring Immunex (IMNX Quote) for about $17 billion to $18 billion, the toughest task ahead for the biotech companies will be convincing Wall Street that the deal makes sense.

And to do this, Amgen has to sell investors on the future growth potential of Enbrel, Immunex's top-selling rheumatoid arthritis drug. If you believe, as Immunex executives claim, that Enbrel's annual sales can grow more than fivefold to $5 billion a year in the next five years, then this deal looks good. Recently, Amgen forecast 20% earnings-per-share growth over the next five years. If that goal has to be set aside in the near term, then gaining access to a super-growth drug such as Enbrel makes earnings dilution more palatable.

But if you're someone who sees serious competition from other drugs on the horizon making such rosy growth targets unattainable, then Amgen is spending a whole lot of coin to get not much in return. ...