The margin of safety: the ten-billion-dollar lesson from Amgen
portfolio companies as a routine, but amidst the flurry of analysis, have you ever paused to reflect on how much of their inner working we truly grasp? How many acclaimed attributes of greatness remain valid, and how much can we discern from a distance? These questions hold significant implications for the valuations we are prepared to endorse, moulding our long-term returns. Permit me to recount the story of Amgen, a leading biotechnology company based in the United States, as an illustrative case study.
A notable book that emphasized the importance of corporate culture by looking at successful companies (stock price performance as a guide) ranked Amgen prominently. Amgen's adeptness in «embracing a myriad of possible dangers» was a strategic manoeuvre that propelled the company to a superior standing.
The actual story was different. Safi Bahcall recounts in his book «Loonshots» that Amgen teetered on the edge of bankruptcy. The company's initial endeavours, ventures into chicken growth hormone and pig vaccines, yielded disappointing outcomes. Amgen's destiny rested on a solitary project: the creation of a drug to stimulate red blood cell production. Amid fierce competition, Amgen emerged victorious in this pivotal race, securing its future and evolving into the biotechnology giant it is today.
A crucial factor in Amgen's success was the contribution of University of Chicago professor Eugene Goldwasser. After 25 years of dedication, Goldwasser discovered the pivotal solution: an eight-milligram vial of purified
