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Often times, the best investment in a Biotechnology or Drug company is to buy debt offered by it. In general, these companies seek financing for their development through the issuance of corporate bonds or preferred stocks. These debt instruments, and particularly convertible debt issues, provide income while exposing convertible investors to the movements of the underlying common stock should the company’s product become commercially successful.

Because the development of new products requires much research and cost, companies in these industries generally operate at a loss during the initial stages of development. The common stock holders are usually not paid any dividend until products have become household names. However, investing in debt issued by these companies insures, at least for a while, some income while the company holds the debt, and if products do become commercially successful, the possibility of capital gains.

Convertibles, by nature, provide both fixed income and exposure to the activities of the common stock. Below is a partial list of some of the Biotechnology/Drug manufacturing companies that have outstanding convertible notes or preferred shares covered in our Service.

Com Tkr

Convertible Securities

Mat Date

Issue Size($MM)

Recent Price

Curr Yld(%)

Industry

Com Price

 

AMGN

Amgen 0.125s2011               

2/1/2011

2500.00

99.21

0.1

Biotec

 $60.72

 

AMGN

Amgen 0.375s2013               

2/1/2013

2500.00

101.23

0.4

Biotec

 $60.72

 

CEPH

Cephalon 2s2015                

6/1/2015

920.00

149.35

1.3

Drug 

 $66.95

 

JNJ 

Johnson/Johnson (Alza) 0s7/20  

7/28/2020

910.00

94.04

0.0

Drug 

 $65.02

 

TEVA

TEVA Pharm 1.75s2026D

2/1/2026

813.50

128.23

1.4

Drug 

 $62.43

 

GILD

Gilead Sciences 0.5s2011       

5/1/2011

650.00

120.20

0.4

Drug 

 $45.70

 

GILD

Gilead Sciences 0.625s2013     

5/1/2013

650.00

126.34

0.5

Drug 

 $45.70

 

TEVA

TEVA Pharm 0.25s2024 B          

2/1/2024

634.40

179.93

0.1

Drug 

 $62.43

 

MYL 

Mylan Laboratories 1.25s2012   

3/15/2012

600.00

109.24

1.1

Drug 

 $21.75

 

* Prices as of April 16, 2010

Selected Convertible Profiles:

Amgen (AMGN) is the world's largest independent biotech company. It discovers, develops, manufactures, and markets medicines for grievous illnesses. The company's principal products, which represented 93% of total sales in 2009, include Aranesp and EPOGEN (treat anemia in patients with chronic renal failure, etc.); Neulasta and Neupogen (fight infections in patients undergoing chemotherapy, etc.), and Enbrel (treats autoimmune diseases). Amgen’s convertibles offer small annual incomes, but the common stock pays nothing. Furthermore, the convertible bonds trade at modest premiums over conversion value and, consequently, allow favorable participation in the activities of the common stock. That is, for a given percentage rise or fall in the stock price, the convertible issue will rise to a slightly less extent than the stock, but will not fall nearly as much las the stock should its price decline. Internet: www.amgen.com.

Mylan Laboratories (MYL) manufactures prescription generic drugs (mostly antibiotic, anti-inflammatory, cardiovascular, and central nervous system agents) and brand-name dermatological products. The company has 133 prescription products in 40 therapeutic areas. The company’s outstanding convertibles, while providing annual income, offer excellent upside participation in a stock that actually pays dividends. In addition, they provide solid downside protection should there be a decline in the stock price. Internet: www.mylan.com.