While some analysts lowered their ratings on the US biotechnology firm Chiron Corporation after clinical trials of a new vaccine for genital herpes revealed that two doses of the vaccine did not reduce the monthly rate of herpes outbreaks compared to placebo (Marketletter October 14), others said that the company was still the most diversified of all biotechnology companies. Chiron has many other potential drugs and diagnostics, they said, and though the failure is more serious for Chiron than it would be for a company like Merck & Co or Pfizer, it is not devastating.
Chiron should be looked on as if it were virtually a biotechnology mutual fund, noted Michael Murphy of the California Technology Stock Letter, who said the company is in so many different technologies, aside from drugs, that "unless someone was so unrealistic as to expect them all to work," the price before the announcement of the clinical trial failure should have assumed that "probably two-thirds of them would fail."
He also said that Chiron's share price gave it a market capitalization of just over $3 billion, compared to $16 billion for Amgen. Because Chiron has so much in development, it will someday have a higher market capitalization than Amgen, he said, adding that the idea that Chiron is worth just 20% of Amgen is "ludicrous."
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