Drug Ruling Propels Amgen Stock

Amgen Inc. shares soared Monday after the maker of the world’s best-selling bioengineered drug, the anemia treatment EPO, won exclusive rights to sell it in a new once-a-week form.

An arbitration panel ruled that Amgen’s 1985 licensing agreement with Johnson & Johnson covered only the current drug, usually taken three times a week, and gave Johnson & Johnson no rights to a new weekly version.

The ruling, which came after the close of New York trading Friday, boosted Amgen shares $12.19 to close at $100.31 in heavy trading on Nasdaq. Johnson & Johnson fell $2.63 to close at $76.88 on the New York Stock Exchange.

Amgen’s victory means the Thousand Oaks-based company could see $1 billion in annual sales for the weekly version of the drug, called NESP, by 2003, on top of more than $1 billion a year it will continue to receive from sales of EPO. Amgen needs that revenue to develop new drugs to stay in the front ranks of biotechnology companies.

“This result couldn’t have been better for Amgen,” said Dennis Harp, an analyst with BT Alex Brown Inc., which raised its recommendation on the company’s shares to “strong buy” from “buy” Monday morning. At least 10 other analysts also raised their ratings.

EPO, or recombinant human erythropoietin, is used to rebuild red blood cells depleted in procedures such as kidney dialysis or cancer therapy. Amgen sells EPO in the U.S. as Epogen for kidney-dialysis patients. Johnson & Johnson sells it as Procrit in the U.S. for anemia in cancer, AIDS and surgery patients.

Johnson & Johnson also sells the drug for all uses in overseas markets except Japan and China.

The ruling gives Amgen a crack at selling NESP in overseas markets, and in the U.S. for uses other than kidney dialysis. That’s crucial because the Clinton administration is considering cutting what it pays for Epogen, almost all of which is paid for by Medicare.

Monday’s trading added nearly $5 billion to Amgen’s market capitalization, bringing it to $25.7 billion, close to that of Pharmacia & Upjohn Inc., the No. 10 U.S. drug maker.

To play in that league, though, Amgen needs to have more drugs with billion-dollar sales potential in its development pipeline, analysts said. With revenue from NESP assured, Amgen will have funds to boost spending on research and development, Chief Executive Gordon Binder said.

Binder said NESP profit could also pay for building up Amgen’s sales force and perhaps buying back shares.

For Johnson & Johnson, the ruling is a setback in its effort to hold onto sales of a drug that last year accounted for about $1 billion of its $7.7 billion in pharmaceutical sales.

Most industry analysts had expected Johnson & Johnson to prevail in the arbitration. While the decision cannot be appealed, the company could seek to use its marketing muscle to retain market share for the current version of the drug, benefit from development of an improved third-generation version of the drug or try to persuade Amgen to negotiate a compromise.

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Amgen Victory Dance

Amgen stock soared after it won a battle with Johnson & Johnson for the exclusive right to market its anemia treatment erythropoietin, or EPO, in a new once-a-week form. Monthly closes and latest on Nasdaq:

Monday:$100.31, up $12.19

Source: Bridge *

* INVESTOR SPOTLIGHT: How a key biotechnology stock index has fared. C15