Editor

A longstanding squabble between Amgen Inc. and Johnson & Johnson over epoetin alfa ended last week with an arbitrator's $150 million decision favoring the former, just as another skirmish - not legal - began to heat up between the pair.

The arbitrator, former federal judge Frank McGarr, gave forth his edict in a dispute with a history starting in 1995, when Amgen claimed the Ortho Biotech subsidiary of J&J breached a licensing deal entered 10 years earlier.

Under the terms of that deal, J&J got the exclusive right to promote and sell its version of epoetin alfa, called Procrit, for use with non-dialysis patients in the U.S., while Amgen retained the exclusive right to promote and sell its brand of the same drug, the blockbuster red blood cell booster Epogen, for use in dialysis patients.

McGarr allowed that sales had been made in markets where J&J did not belong, but he said this didn't warrant ending the contract. J&J will pay the $150 million but will ask for attorney's fees and costs from Amgen, which is seeking the same from J&J, and a decision from the arbitrator on that matter is expected by the end of the year.

It was the fourth and final arbitration between Amgen and J&J since 1989, all deliberated by McGarr, who earlier awarded Ortho $164 million for Amgen's delaying the entry of Procrit into the non-dialysis market, and $187 million for sales by Amgen's force into Ortho's market. Amgen got an earlier award, too - $90 million - related to a dispute over the license.

"I don't think Amgen is going to be forced to cover J&J's fees, but I don't know if they are going to be recover their own, either," said Stefan Loren, an analyst with Legg Mason Wood Walker Inc.

With its $150 million, Amgen likely will buy back some shares from Wyeth, Loren said, but "I don't think Wyeth wants to dump their shares and hurt their own investment, and there are limits to what they can sell at a given time, 20 million shares per quarter."

Of more immediate interest, anyway, is Amgen's plan to get its Rhode Island manufacturing facility in top shape for making Enbrel (etanercept), the rheumatoid arthritis drug acquired in Amgen's merger with Immunex Corp.

Also of concern, Loren said, is Enbrel itself.

"There are a lot of uncertainties," he said. "We've been telling our clients that we think there's a good possibility of Abbott coming to market [with the RA treatment D2E7, or adalimumab] earlier than original expectations. They could be launching as early as March - around the same time we see the reintroduction of Enbrel supply into the market. That's pretty touchy. At the same time, Abbott has established an early access program [for D2E7]."

Abbott Laboratories Inc. unveiled positive Phase III data with the anti-tumor necrosis factor therapy in June, and approvals are pending in Europe as well as in the U.S.

Also on the horizon for RA: Rituxan (rituximab), the non-radiolabeled chimeric antibody, developed by IDEC Pharmaceuticals Corp. with Genentech Inc., and already approved for relapsed or refractory, low-grade or follicular, CD20-positive, B-cell non-Hodgkin's lymphoma.

Earlier this month, IDEC offered an abstract describing positive interim Phase II results with Rituxan against RA, with more to be presented Oct. 26 at the meeting of the American College of Rheumatology in New Orleans, an annual fountain of news from the anti-inflammatory front.

"Rituxan is probably going to take some of the market, but these [anti-TNF] drugs clearly have a foothold," Loren said, adding that Rituxan is "much more difficult to give" and may "pick up failures" - patients on whom the existing drugs have quit working.

Breaking the same week as the arbitrator's award was more news about the monoclonal antibody Remicade (infliximab), also an anti-TNF and the only biologic approved to treat both RA and Crohn's disease, from Centocor Inc., a J&J company.

Centocor promised data at the ACR meeting on Remicade against a variety of immune-mediated inflammatory disorders, including psoriatic arthritis and ankylosing spondylitis. The company said it has a newly expanded research and development platform designed to find new therapies to treat immune-mediated inflammatory disorders, building on the success of Remicade

An article in the American Journal of Gastroenterology reported this month that Remicade may induce remission in ulcerative colitis patients, and allow them to use fewer steroids.

On the RA front, Amgen had news the same day as Centocor. With Wyeth, Amgen said, it has begun the largest clinical trial to date to evaluate an anti-TNF drug (Enbrel) in RA patients - 10,000 of them, in a study known as Radius. The second phase of the study will compare the safety, efficacy and treatment patterns of 5,000 RA patients treated with Enbrel with that of 5,000 patients who have been treated with a variety of disease-modifying anti-rheumatic drugs (DMARDs) in the first phase.

Enbrel will be used in eligible patients either as monotherapy or in addition to the patient's current DMARD treatment. Enbrel, like Remicade, boasts an "only." It's the only biologic approved for the first-line treatment of RA.

Amgen shot a couple more fireworks into the sky later in the week, when the company submitted to the FDA a supplemental biologics license application for use of its other drug, Kineret (anakinra), to inhibit progression of structural damage in adults with moderate to severe RA.

The sBLA was based on a year-long study with Kineret, an interleukin-1 receptor antagonist drug approved last November for RA. Analysts viewed the filing as a mild positive, noting efficacy levels with Kineret that are somewhat lower than the anti-TNF treatments, and the fact that Kineret still doesn't have a label for first-line treatment of RA. But the drug is often prescribed for those patients who have failed treatment with Amgen's other treatment, Enbrel, or with Remicade (infliximab, another anti-TNF drug).

Also, Amgen disclosed its third-quarter financial report, showing earnings per share at 34 cents vs. 30 cents for the third quarter of 2001, an increase of 13 percent. Adjusted net income was $437 million in the third quarter of 2002 compared to $330 million in the third quarter of 2001, a 32 percent increase.

Overall revenue increased 49 percent, to $1.5 billion. The earnings report excluded expenses related to the Immunex acquisition in the third quarter, during which Amgen reported a loss of $2.6 billion, or $2.10 per share, mainly due to the one-time write-off of in-process research and development of $3 billion related to the merger.

New products had an especially strong showing in relation to some estimates, with Aranesp (darbepoetin alfa), the second generation of Epogen, chalking up $114 million in revenues and Neulasta (pegfilgrastim), a longer-acting version of Neupogen used to decrease the incidence of infection during many types of cancer-related chemotherapy, selling $142 million.

The blockbuster Epogen held its own at $558 million during the quarter, Neupogen generated $332 million and Enbrel pulled in $158 million.

Despite some risk, Loren remained strong on Amgen.

"Overall, this is a stock that's nicely liquid. They've got some good product launches coming, and it's not subject to generic drugs that are starting to come to market," he said.

"We like what we see," he said, adding that in a time when many stocks have become overvalued, "I don't think Amgen is there yet."