Ruling Gives Amgen Access to New Market

Amgen Inc. said Friday that it has won a long-running licensing dispute with pharmaceutical giant Johnson & Johnson in an arbitration decision that could allow Amgen to enter a multibillion-dollar drug market from which it has been excluded.

“It’s a total victory,” said Andrea Rothschild, spokesperson for Thousand Oaks-based Amgen, the world’s largest biotechnology company.

At issue in the arbitration was Amgen’s ability to distribute a new, long-lasting version of the drug erythropoietin, or EPO, which is used to treat anemia in kidney dialysis patients and in cancer patients undergoing chemotherapy. Johnson & Johnson had claimed that a licensing agreement it had with Amgen for EPO also applied to the new version of the drug and should prevent Amgen from distributing it.

In 1985, Amgen licensed EPO to Johnson & Johnson for non-dialysis use in the U.S. and for all uses worldwide, except in Japan and China. Amgen retained rights to market EPO to kidney dialysis patients in the U.S., where it is sold under the brand name Epogen.

Even under those restrictions, Epogen has been Amgen’s best-selling product, with sales now at $1.4 billion a year.

However, Amgen has moved ahead with human trials of its long-acting version of EPO, which it calls Novel Erythropoiesis Stimulating Protein (or NESP). The new drug has a distinct chemical structure. Because it circulates in the blood longer than Epogen, it can be given once a week rather than the three times a week required for the older drug.

Early clinical trials with dialysis patients appear to show that NESP is safe and effective, but it still must undergo further tests and win approval from the Food and Drug Administration. The company is also testing the new drug in kidney failure patients who are not on dialysis.

Johnson & Johnson claimed that the NESP was covered by its licensing agreement, and the matter went before a three-person panel of the American Arbitration Assn. in Chicago in June 1997. The panel released its decision Friday after the stock markets closed.

Wall Street analysts have been watching the case closely. The consensus has been that a victory for Amgen could allow it to compete head to head with Johnson & Johnson in a growing worldwide market that now exceeds $3 billion a year for all EPO uses.

“This is huge,” said Meirav Chovav, biotechnology analyst for Salomon Smith Barney. NESP “could be a third billion-dollar drug for Amgen. And obviously that means that Amgen’s growth rate will accelerate dramatically, probably beginning in 2001.”

Amgen’s other $1-billion-a-year drug product is Neupogen, which is used to stimulate white blood cell production in chemotherapy patients.

Amgen chairman and CEO Gordon Binder was cautiously optimistic in responding to the outcome of the dispute. “We are very pleased with the arbitrators’ decision and now look forward to focusing our efforts on the continued development of this promising new drug to treat patients suffering from the debilitating effects of anemia associated with chronic renal failure, cancer and other diseases,” he said in a prepared statement.

Johnson & Johnson said it was still reviewing the arbitration decision and declined to characterize it further. The world’s fifth-largest drug company said it was “disappointed with the decision,” but intends to “remain a market leader” in the sale of EPO in the U.S. and overseas.

Amgen shares closed at $88.13 Friday on Nasdaq, up from $86.06 the day before.