2 Accused of Plot to Sell Epogen Formula : Biotech: It’s the second foiled industrial espionage attempt in two years involving Amgen’s signature drug.

In a case of industrial espionage with a blockbuster biotechnology drug as the prize, two men have been charged with conspiring to sell a patented formula for the genetically engineered Epogen to an FBI agent posing as a Russian spy.

Epogen is produced by Amgen Inc. of Thousand Oaks, the world’s biggest biotechnology concern, and accounted for nearly half the firm’s 1993 revenue. The widely used drug stimulates production of red blood cells.

Authorities said it was the second foiled espionage attempt in two years involving Epogen.

Charged in U.S. District Court in Boston on Thursday were Subrahmanyam M. Kota, 49, and Vemuri Bhaskar Reddy, 47, natives of India who live in the Boston area. Each was charged with one count of conspiring to transfer and transport stolen property with a value of $5,000 or more in foreign commerce.

According to the U.S. attorney’s office in Boston, Kota is president of Boston Group, a software consulting firm. Reddy was identified as a scientist who formerly worked at Integrated Genetics, which was acquired by Genzyme Corp. in the late 1980s. Integrated Genetics had earlier developed a patented version of Epogen but never commercialized the drug.

The complaint alleges that in October, 1992, an undercover FBI agent, posing as a Russian KGB agent, contacted Kota and asked if he was interested in “renewing his relationship” with the Russian spy agency. It wasn’t clear what prompted the FBI’s contact or what Kota’s alleged ties to the KGB might be.

Kota agreed and, in later meetings with the FBI operative, offered to sell the agent a patented cell line for Epogen that Reddy had stolen from Integrated Genetics, the complaint states.

According to the FBI affidavit, Amgen helped with the investigation by testing a sample of the stolen formula and concluding that it contained a form of Epogen consistent with the Integrated Genetics version.

Kota appeared at a hearing Thursday, but he will not enter a plea until he appears before a grand jury, according to Assistant U.S. Atty. Robert L. Ullmann. Reddy’s hearing was continued until Wednesday at the request of his counsel.

The two were being held Thursday night without bail. If convicted, each faces a maximum of five years in prison and a $250,000 fine.

While U.S. Atty. Donald K. Stern stressed the importance of the case to the entire biotechnology industry, it is particularly significant for Amgen. Epogen sales accounted for about $600 million of Amgen’s $1.3 billion in revenue last year, and court documents state that Amgen’s 1994 sales of Epogen are expected to reach $700 million.

Amgen holds the exclusive rights to produce Epogen in the United States and receives international royalties on sales.

The drug is a genetically engineered copy of the naturally occurring erythropoietin hormone, which stimulates production of red blood cells. The drug is widely used by kidney dialysis and AIDS patients who suffer from anemia. Worldwide sales of Epogen total about $1 billion annually, court documents say.

Biotechnology analyst David Stone at Cowen & Co. in Boston said this type of industrial espionage is generally “not a big threat” to Amgen because Epogen is sold to hospitals and dialysis centers and not easily administered by individuals. He said it would be difficult to create a black market for the drug even outside the United States.

“You can’t sell Epogen off the back of a truck. It’s not like bootleg videotapes,” he said. He added, however, that “it’s important that we not treat this lightly. We want to make sure intellectual property is well respected.”

This is not Amgen’s first brush with industrial spying. Last year, the company--along with the FBI and a private investigative firm--thwarted an apparent scheme by a low-level employee to steal cells that would enable an outsider to reproduce Epogen.

In the new case, Amgen spokesman David Kaye said he was less concerned with any potential market damage to Amgen--the company does not sell Epogen in Russia--than with the injury that could be done to a patient who received an illegal and presumably lower-quality version of Epogen.