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ABBOTT LEAVES AMGEN: 10-YEAR INVESTMENT EARNS ABOUT $350 MIL.

Executive Summary

ABBOTT LEAVES AMGEN: 10-YEAR INVESTMENT EARNS ABOUT $350 MIL. for Abbott. As one of the initial first-round investors in Amgen in early 1981, Abbott got in on the ground-floor of 1990's hottest biotech company. Abbott completed a five-month sell-off of its holdings on Feb. 6 with the sale of its remaining 6.5% stake (2.5 mil. shares). Based on rough calculations of the returns from the sales of 2.5 mil. shares during the period August 1990 through January 1991, Abbott grossed about $ 140 mil. in that period. Amgen stock climbed 63% from its end of August close to the end of January. The Feb. 6 sell-off of the remaining 2.5 mil. shares grossed approximately $ 206 mil. for Abbott. The 2.5 mil. share trade crossed at 82-1/2 on the Dow Jones NASDAQ ticker. Amgen closed Feb. 6 unchanged at 83 on volume of 5.91 mil. shares. Abbott has not yet filed a 13D with the Securities & Exchange Commission and will only say that it will realize a "substantial gain" from the 2.5 mil. shares. The company said Feb. 6 that it "expects to offset this gain with the establishment of reserves for post-retirement, health and other benefits." By comparison with its returns, Abbott's investment was negligible. In 1981, Abbott was among a group of four venture capital investors in Amgen, along with Tosco Corp., entities associated with Rothschild, Inc. and Asset Management Partners. The group put in roughly $ 19 mil. total, purchasing 1.882 mil. shares of Series A Convertible Preferred at $ 10 per share. Abbott's initial investment was about $ 5 mil. In 1983, Abbott added another $ 19 mil. into Amgen in a technology development deal and research funding arrangement. The Abbott R&D investment in Amgen did not return any commercial products to the investor. The Abbott experience with Amgen will probably go down in industry mythology as the model of a seed money investment that bore fruit without producing any products for the investor. In addition to its money ties, Abbott has had a close alumni affiliation with the company since the start. Amgen founder and current Chairman Emeritus, George Rathmann, came from Abbott. Another tie to Amgen's past was severed Feb. 7 with the resignation of President Harry Hixson, 52, a former Abbott exec. Hixson's resignation, effective immediately, was attributed to pursuit of "other interests," Amgen said. The company does not plan to search for a successor to Hixson; his responsibilities will be divided among current management. Hixson's Amgen common stock (including options) as of June 1990 totaled over 220,000, which would have split to over 440,000 shares in mid-August. If he exercised his options and held most of that stock until his resignation, it would have been worth approximately $ 36 mil. at current market prices.
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