National Editor

With generic competition in Europe looming on the horizon, industry powerhouse Amgen Inc. once again reported strong earnings, thanks largely to the company's erythropoietin (EPO) franchise.

CEO Kevin Sharer called 2003 "a year of very significant accomplishment."

Another one.

George Morrow, Amgen's vice president of global commercial operations, said during a conference call: "We enter the year with good momentum and are very confident that we can continue to grow our products globally in 2004."

Earnings were disclosed late Thursday, and Amgen's stock (NASDAQ:AMGN) rose $2.46 Friday to close at $63.93.

Adjusted earnings per share reached 46 cents for the fourth quarter, compared to 35 cents for the same quarter in 2002, an increase of 31 percent. Full-year adjusted EPS were $1.90, vs. $1.39 in 2002, a rise of 37 percent.

SG Cowen, in a report made public Friday, warned that at least seven European Union firms are developing generic versions of EPO, in a part of the world where regulatory guidelines (though changing) still are less stringent than U.S. rules.

Several of those companies plan product launches as early as 2006, at discounts of 10 percent to 50 percent, Cowen reported, and the upshot could be a reduction of estimated revenues from the EPO franchise, dropping them from about $1.4 billion to an amount between $530 million and $931 million.

Meanwhile, though, Amgen's adjusted net income was $615 million for the fourth quarter, 30 percent more than the $472 million for prior-year period. The full-year totals compare at $2.5 billion for 2003 and $1.7 billion for 2002, a 53 percent increase.

Total product sales rose 38 percent to $2.2 billion, up from $1.6 billion in the fourth quarter of 2002, with international sales soaring to $337 million from $160 million - an increase of 111 percent.

Strong in the product lineup were Aranesp, the second generation of Amgen's red-blood-cell booster Epogen (epoetin alfa), first approved for chronic renal failure; Enbrel (etanercept), first approved for rheumatoid arthritis and gained through a merger with Seattle-based Immunex Corp.; and Neulasta (pegfilgrastim), used to decrease infection during chemotherapy.

Combined fourth-quarter 2003 sales of Epogen, for anemia patients on dialysis, and Aranesp, for anemia associated with chronic kidney disease and chemotherapy, jumped 40 percent to $1.2 billion, from $827 million in the same quarter of 2002. Epogen contributed $651 million of that amount, rising a comparatively modest 5 percent from the previous year's period sales of $620 million. Aranesp, on the other hand, sold $503 million worldwide, vs. $207 million for the fourth quarter of 2002.

In the U.S., Aranesp sold $322 million in the fourth quarter, compared to $150 million the year before. International sales totaled $181 million, compared to $57 million, benefiting from a foreign-exchange rate of about $28 million.

Enbrel sold $380 million in the 2003's fourth quarter, compared to $204 million for the fourth quarter of 2002. Amgen noted that, if it had owned Enbrel for the full year of 2002, worldwide sales would have been $802 million, with 2003's total $1.3 billion amounting to an increase of 62 percent.

Neulasta is the longer-acting version of the white-blood-cell stimulator Neupogen (filgrastim), and together those two products sold $688 million worldwide in the fourth quarter, 27 percent more than the $541 million the year before. Neulasta sales added up to $367 million for the latest-reported quarter, jumping 27 percent over the year prior, and Neupogen dipped 2 percent - from $329 million to $321 million - as patients converted from one therapy to the other.

Some investors might take the Cowen report, offered as a "contrary view" in its "investment controversy series," as a pall over the good mood that's been accompanying Amgen's earnings reports for quite a while.

"We believe most investors have chosen to ignore or downplay the potential impact of biogenerics to Amgen's Aranesp EU franchise," the Cowen report declared. "Most analyst models assume Aranesp sales will increase steadily over the long term, based upon further market-share gains and penetration of new indications."

The lead analyst on the report, Eric Schmidt, could not be reached, but the report offers the estimate that, if the generic EPOs are be priced at a "modest discount," then "first-generation products would lose 20 percent to 50 percent market share to biogenerics in oncology indications and 50 percent to 80 percent share in dialysis indications," reducing Amgen's 2007 EPS by a range of 19 cents to 37 cents.

Another potential threat perceived by some to Amgen's EPO business: Johnson & Johnson, an Amgen licensee that sells epoetin alfa as Eprex in Europe and Procrit in the U.S.

During the Amgen conference call, one analyst pointed out New Brunswick, N.J.-based J&J's recent claim that it has seen losses in market share "stabilizing."

Morrow said he was "not going to comment on [J&J's] performance, certainly" but told investors "first of all, Aranesp is a better product. We expect continued robust market growth. There's plenty of room for both products to grow, certainly in the U.S., and potentially some inflation-related price increases going forward."