Question: Amgen, Inc. uses state-of-the-art biotechnology to develop human pharmaceutical and diagnostic products. During 1983 and 1984 Amgen had losses of $4.9 million and $7.8 million, respectively. The firm barely broke even between 1985 and 1987 and had sizable losses ($8.2 million) in 1988 . On the strength of royalty income from the sale of its Epogen product, a stimulator of red blood cell production, profits increased steadily from $19 million in 1989 to $355 million 1993 to $670 million in 1996 . Profits were expected to exceed $900 million per year by 1998-1999, according to forecasts prepared by the Value Line Investment Survey. Value Line rated the safety (a risk measure) of Amgen to be "average.

1. Discuss the past, present, and projected performance of Amgen in the context of risk-return trade-offs.
2. Amgen's 1993 return on equity (net income \(\div \) shareholders' equity) about 30 percent. In 1993, its projected return on equity was 28.5 per cent for 1995 and 22.5 percent during 1997-1999. The 1989 return of equity was 10.2 percent, and the 1985-1987 return on equity was about 0.9 percent. Do you believe Amgen is now earning "excessive profits" from its Epogen product? Why or why not?

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