By Debbie Strickland

Staff Writer

With sales of its two core products growing less than expected, Amgen Inc. posted fourth-quarter earnings of $179.7 million, a one percent gain over the comparable 1996 period.

Earnings per share of $0.67 were one cent under analysts' consensus.

For the year, the Thousand Oaks, Calif., company's earnings fell 5.2 percent to $644 million, down from $680 million in 1996. The culprit: a $96 million third-quarter charge to compensate Ortho Pharmaceutical Corp. for Amgen's sales of erythropoietin (EPO) in Ortho's domain of non-dialysis indications.

Marketed by Amgen under the name Epogen and by Ortho as Procrit, EPO is the anti-anemia protein drug the companies co-developed. Ortho is a division of New Brunswick, N.J.-based Johnson & Johnson.

Earnings per share of $2.35 were down three percent vs. 1996, but excluding the EPO spill over sales charge, earnings-per-share growth for 1997 would have been 12 percent.

In the fourth quarter, revenues hit $606.7 million, a 2.2 percent gain over 1996's same-quarter tally of $593.5 million. The bulk of revenues—$564.3 million—came from product sales, which were up just one percent compared to the fourth quarter the previous year.

The company's two core products are the red-blood-cell booster Epogen and Neupogen, which replenishes white blood cells of cancer patients undergoing chemotherapy.

For the year, Neupogen sales were up four percent to $1.06 billion, while Epogen sales rose eight percent to $1.16 billion. Amgen's third product, Infergen generated sales of $3 million following its October launch.

"As we move into 1998, Epogen and Neupogen continue to provide strong support for our product development pipeline," said Gordon Binder, chairman and CEO, in a prepared statement.

In the fourth quarter, though, growth slackened. Sales of Neupogen inched up 0.7 percent to $272 million, and Epogen's $289 million take was unchanged vs. the fourth quarter of 1996.

Combined sales of the company's two blockbuster products were $14 million below the expectations of analysts Eric Schmidt and Tim Wilson, of UBS Securities, in New York, with Neupogen's results the more disappointing of the two.

"In light of the uninspiring financial performance of Amgen's three marketed products, investor attention is keenly focused on the company's pipeline," the UBS analysts wrote in their report on the earnings news.

To support that pipeline, Amgen spent $630.8 million (26 percent of revenues) on research and development, up from $528.3 million (24 percent of revenues) in 1996.

Amid all the year-end numbers, Amgen updated investors on three products in clinical development. During the fourth quarter, Amgen said, the company launched a Phase III trial of megakaryocyte growth and development factor (MGDF) in chemotherapy patients undergoing bone marrow transplantation, a Phase II trial of the obesity drug leptin, and a Phase I trial of a second-generation calcimimetic compound in hyperparathyroidism.

Stemgen, a stem-cell factor for use in cancer patients undergoing chemotherapy, is on track for FDA approval and commercial launch this year, with an MGDF launch possible in 1999 or 2000, according to the UBS analysts. MGDF's market potential, they wrote, exceeds $100 million, "yet clinical data on the product have been mixed."

Two other growth factor projects are moving slowly, noted Albert Rauch, an analyst with Everen Securities Inc., in Chicago.

"Amgen's pipeline continues to under perform," he wrote in an earnings note. "We do not see Amgen making any major product introduction in the next two years."

Schmidt and Wilson agreed the "pipeline continues to look bleak until at least 2001.

The company ended the year with $1.03 billion in cash, down 4.7 percent from Dec. 31, 1996. In November, Amgen filed for a shelf registration to sell up to $500 million in debt securities.

A stock repurchasing plan moved ahead in the fourth quarter, with the firm buying back 6.3 million shares for $321 million. For the year, Amgen spent $738 million to acquire 13.7 million shares. An additional $712 million is available for 1998 repurchases.

The company's shares (NASDAQ:AMGN) closed Friday at $48.50, up $1.375. *