Amgen Funding Quest for Neurological Drugs : Biotechnology: The firm is staking Regeneron’s research into nerve regrowth in treating Alzheimer’s and other degenerative diseases.

Regeneron Pharmaceuticals Inc., which caused a splash on Wall Street when it went public recently, hopes one day to be the next Amgen Inc.--that is, the next blockbuster biotechnology company. And Amgen hopes Regeneron becomes the next Amgen.

That’s because Amgen, based in Thousand Oaks, is a major partner in the effort by 3-year-old Regeneron to develop and market biotechnology-based drugs that would combat Parkinson’s disease, Alzheimer’s disease and other neurological ailments.

Amgen has invested $18.5 million so far in Regeneron--and the amount may rise to $53 million over the next five years. At the moment, Amgen also has a 7% voting stake in Tarrytown, N.Y.-based Regeneron.

The companies also have a joint-venture deal to market any neurological drugs based on Regeneron’s technology in the United States, with each sharing the profits (or losses). Amgen also gets to market the drugs itself in Europe under license, and Amgen would be Regeneron’s major manufacturer--should any of the drugs be approved for sale.

But Regeneron now is just a research-and-development firm that admits sales of any of its proposed drugs are years away, if they ever reach market at all. The company hasn’t even gotten regulatory clearance to start testing its drugs on humans, and it faces an exhaustive approval process before it can sell any drugs. In effect, Regeneron is roughly in the same phase of its corporate development that Amgen was a few years ago.

Regardless, the Regeneron pact enables Amgen to stake its claim on the future of neurological drugs, whose potential is seen as enormous by Amgen and biotechnology analysts.

About 6 million Americans suffer from Alzheimer’s and other so-called “neuro-degenerative” diseases, but the patients have few therapeutic aids and no biotechnology drugs have yet been developed to treat these problems.

David K. Stone, who follows biotechnology for the brokerage firm Cowen & Co. in Boston, said, “it’s a very large market that’s not under-served, it’s not served at all. What Amgen is saying is, ‘We’re on track, we needed to identify this next big area and ensure we will be a participant.’ ”

“It’s one of the most significant markets for biotechnology drugs,” said Lowell E. Sears, Amgen’s chief financial officer. “It’s a field with substantial commercial potential, and potential for alleviating human suffering.”

Amgen has become a kind of blueprint that other biotechnology companies would like to follow because it actually managed to develop two biotechnology drugs from the laboratory and bring them to market.

Its first successful drug was Epogen, which fights chronic anemia in patients with kidney disease. Amgen’s sales, virtually nonexistent two years ago, totaled $241.7 million in the nine months that ended Dec. 31, mostly because of Epogen. And last month, Amgen’s second drug, Neupogen, which spurs production of white blood cells that help cancer patients fight infections, was approved for U.S. sale.

Neupogen “all by itself is enough to drive Amgen for the next several years,” and both drugs will probably produce $1 billion in annual sales for Amgen by the mid-1990s, Stone said.

Amgen won’t have another new drug capable of reaching the market for probably several years. But the Regeneron deal is not intended to fill that gap, because Regeneron’s products are even further away from approval than those Amgen is developing, said James McCamant, editor of the Medical Technology Stock Letter.

The Regeneron deal is Amgen’s “way of making a commitment to the neuroscience field,” he said. Nonetheless, Amgen “in the next 12 months will either acquire a couple more products or eventually acquire one of the smaller biotechnology companies” to fill that hole in its product line, McCamant predicted.

Amgen’s Sears confirmed that his company is looking at more acquisitions, either in licensing technology or buying products outright. But he declined to be more specific.

Amgen now has the resources to finance such deals. Besides its strong sales growth, Amgen’s stock has soared from $21.50 a share early last year to its closing price Monday of $132 a share in national over-the-counter trading (adjusted for a 2-for-1 split last summer). So whether it uses cash or stock, Amgen has the means to buy outside assets.

Regeneron is a long way from that kind of success. Still, the company made headlines two weeks ago by selling 4.5 million common shares to the public for $22 apiece, netting $92.4 million for the company after underwriting costs.

The stock quickly fell back--it closed Monday at $16.125 a share on the OTC market--amid Wall Street rumblings that its lead underwriter, Merrill Lynch & Co., overpriced the offering in the first place. Regardless, the stock’s current price puts a total market value on Regeneron of about $248 million.

Not bad for a company that probably won’t have earnings until the mid-1990s at the earliest. And the offering signaled that investors, influenced by Amgen’s success, are still willing to shift capital to fledgling biotechnology companies.

(Regeneron’s founder and chairman, Dr. Leonard S. Schleifer, and other Regeneron executives declined comment, so as not to run afoul of securities laws that prohibit insiders from saying anything about their company’s stock immediately after its offering.)

According to the company’s literature, Regeneron’s drugs would attempt to slow the death of nerve cells that causes neurological diseases. It would do that by giving patients manufactured clones of the brain’s own “nerve growth factors,” which are proteins that help keep nerve cells healthy. In other words, it would try to perform nerve regeneration--hence the company’s name.

In biotechnology, scientists splice together genes--which contain the blueprints of most forms of life--to reproduce, or clone, substances in laboratories so they can be used to treat specific ailments.

Regeneron says that, to date, it has cloned some proteins in the lab and identified their relation to various nerve cells in the body. But it still must do more biological tests and then start testing the drugs on animals. Human trials are still a year or two away, and Regeneron and Amgen must also design ways to manufacture enough of the drugs to use in the trials.

Amgen has been working on neurological drugs itself, but approached Regeneron beginning in September, 1989, about a joint venture because “they were on a fast track” toward developing the drugs, Sears said.

There’s no guarantee that Regeneron will get its drugs to market first, however. In its stock prospectus, Regeneron noted that several competitors, including Genentech Inc., Synergen Inc. and Cephalon Inc. are also pursuing development of similar drugs.

AMGEN’S STRATEGY Maximize worldwide sales of its two approved biotechnology drugs that treat anemia and fight bacterial infections.

Continue human clinical tests on its third potential drug that could help skin wounds heal rapidly.

Use its joint venture with Regeneron to develop drugs that keep nerve cells healthy and thus ward off such neurological ailments as Parkinson’s disease.