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With both sides still out for blood in the battle over their respective anti-anemia erythropoietin products, Transkaryotic Therapies Inc. (which won European approval in March for Dynepo) and Amgen Inc. (guarding the franchise it has, through the blockbuster Epogen) matched lawyers two weeks ago in an appeals hearing that offered few revelations.

The fight goes on.

"It wasn't much to write home about," said Elise Wang, analyst with Salomon Smith Barney, of the appeals hearing. "I didn't go, but I had seen the briefs filed by each party, which serve as the basis for their arguments, and it was essentially the same arguments on both parties' side."

TKT has the bigger challenge, having been ruled against once already, and "at this point, it's guesswork as to whether [the appellate judges] would overturn anything," Wang told BioWorld Financial Watch. "In general, those kinds of odds are not good. It's a law of numbers."

Meanwhile, biotechnology as a whole is performing feebly this year, thanks to a general market slump, clinical failures and regulatory delays. Wang noted the large-cap firms have been hit particularly hard, dropping about 35 percent - all of which only makes the TKT/Amgen battle of more interest.

TKT's name became, for a while, synonymous with litigation in the minds of some, as the company scrapped with Genzyme General over Replagal (agalsidase alfa), the former's enzyme replacement therapy developed for the treatment of Fabry's disease. Genzyme's potentially competing drug candidate is Fabrazyme (agalsidase beta). Replagal, like Fabrazyme, is approved in Europe. In December, a federal judge dismissed patent litigation brought against TKT by Genzyme.

Amgen, of course, has more going on than TKT. Earlier this month, the company said it will pay Roche Holding AG $137.5 million to gain control over European assets and business related to filgrastim and pegfilgrastim, the pair of white blood cell boosters trademarked Neupogen and Neulasta in the U.S.

Roche had licensed European rights to the drugs from Amgen, but had to sell them back because of a merger between Roche's Japanese subsidiary and Chugai Pharmaceutical Co. Ltd., a Tokyo-based company that has a competing product.

The powerhouse Amgen, which disclosed in December its plan to acquire Immunex Corp. for $16 billion in stock and cash, holds a strong hand with the white blood cell stimulator Neupogen and Neulasta (pegfilgrastim), the second generation of Neupogen, by themselves. The firm reported $1.3 billion in worldwide sales of Neupogen last year, which is a 10 percent increase over sales in 2000 - although Amgen didn't break down the sales by country - and analysts are expecting Neulasta sales to reach $2 billion in the U.S. by 2005.

Immunex, like Roche, found itself having to divest as a result of merging, and sold Leukine (sargramostim) to Schering AG for $380 million in cash. Leukine is not quite identical to Neupogen, but close enough. And the indications are the same: Both drugs are used to fight infection and boost white blood cells in chemotherapy patients.

With overall Nasdaq stress clouding the picture, interest in the Amgen/TKT fight is high. TKT and German partner Aventis Pharma AG are facing off in the U.S. and abroad with Amgen and its Japanese affiliate, Kirin-Amgen.

Last year, the U.S. District Court for the District of Massachusetts ruled that Dynepo infringed Amgen patent claims, and the High Court of Justice in the UK ruled that Dynepo infringed one claim of a patent asserted by Kirin-Amgen. Decisions on the appeals are expected by 2003.

Analysts closely watched the U.S. appeal hearing for clues as to how the three-judge panel might finally rule in the coming months. Much of the court arguing has been over differences in glycosylation, which affects how well the drug works, Wang said.

What's glycosylation? It's the process of adding glycosyl groups to a protein to form a glycoprotein. What's glycosyl? It's a univalent radical derived from a cyclic form of glucose by removal of the hemiacetal hydroxyl group.

The case gets even more complicated from here.

Investors, naturally, are most interested in one thing: the likely winner. In fact, knowing who might come out ahead - or at least not in the back of the pack - in a seriously slumped market has been of particular concern lately in all parts of the sector.

Wang picks not only Amgen as a long-term winner, but several others she believes are good bets in a bleak market. For Amgen, trading at around $50 late last week, Wang has a 12-month price target of $80.

"On a relative-risk basis, Amgen is the safest company [in biotechnology]," Wang said. "The FDA in general has become more conservative and unpredictable, but I'd say Amgen's recent track record has been better than average."

In a research note, she called Amgen "a core holding in the biotechnology sector" that is "on the brink of a new growth phase." Aranesp (darbepoetin alpha), the second generation of Epogen and an anemia treatment for dialysis and non-dialysis patients, reached $2.2 billion in sales last year and is Amgen's next blockbuster, Wang said, noting a mid-July deadline for a decision on approval in oncology. Neulasta won the nod earlier than expected, and there's Enbrel (etanercept), which Amgen gets in the Immunex merger.

The company also has in the pipeline recombinant human keratinocyte growth factor, which reduces the duration of mucositis in chemotherapy patients, and the calcimimetic AMG 073 for hyperparathyroidism, both in Phase III studies.

Another Wang pick is Genentech Inc., for which she placed the 12-month price target at $65. The stock was trading around $37 last week.

Regulatory filings may come in the next year or so for the adult allergic asthma treatment Xolair (omalizumab) and for Xanelim (efalizumab) for psoriasis. Wang is optimistic about Xanelim despite bad preliminary news from a pharmacokinetic study, disclosed in April.

"My viewpoint on Genentech continues to be the same: They are the premier scientific company," Wang said. "Obviously, where they've been hampered in the last year or so is the series of delays that have occurred, but fortunately, there've been no major product dropouts."

The company got around some difficulties with Xolair by narrowing the targeted indication and the Xanelim trouble was due to "a scale-up in commercial product, where the end product was different from the product used in clinical studies," Wang said. "It was happenstance, so they had to do some further work."

More Phase III data regarding Avastin (bevacizumab) in metastatic breast cancer were expected from the American Society of Clinical Oncology in Orlando, Fla., early this week, and Wang said it may be better news than expected.

"We're going to get better color on Avastin," Wang said. "The company has been cautious, because they don't have any Phase II data to support it."

Genentech also has the heavyweight earnings drivers Herceptin (trastuzumab), an anti-HER2 antibody for breast cancer, and Rituxan (rituximab) for relapsed or refractory low-grade or follicular, CD20-positive, B-cell, non-Hodgkin's lymphoma. Data on Rituxan disclosed at the 2001 American Society of Hematology meeting confirmed earlier data and likely will make Rituxan more popular against NHL, Wang said.

Her 12-month price target for Genzyme General is $70. Trading late last week in the $35 range, Genzyme is approaching a "pivotal period," Wang said, with earnings growth due to jump from new products and expanded markets for Renagel, a phosphate binder for patients with end-stage renal disease on hemodialysis, which sold $29.5 million in the first quarter.

"It's relatively inexpensive now," Wang said. "Unfortunately, [Genzyme] did not handle the announcement they made for the first quarter very well, in terms of the action they had taken on Renagel."

The company said it had begun building an in-house Renagel inventory to increase its flexibility to respond to demand as the product enters additional global markets, but said it expected lower revenues and earnings per share because of an inventory reduction. Genzyme's stock fell 11.1 percent on the news.

"Our research made us come to the conclusion that it was ultimately a manufacturing issue," Wang said, adding that she could "fault them easily" for having mishandled the way the problem was presented, but the company seems to have taken steps to fix it.

"Right now, they have an overhang of a lack of confidence," she said.

But Genzyme's products for rare genetic disorders are moving ahead, and some could see approval as early as this year, Wang said, pointing to Fabrazyme; Aldurazyme (laronidase) for mucopolysaccharidosis I (for which Genzyme and BioMarin Pharmaceutical Inc. began a rolling biologics license application last month); and Pompase, a recombinant form of alpha-glucosidase produced in Chinese hamster ovary cells, acquired a year ago from Synpac Inc., of Durham, N.C.

Wang set a 12-month price target of $80 for IDEC Pharmaceuticals Inc., which was trading late last week at around $45. Rituxan, IDEC's nonradiolabeled chimeric antibody partnered with Genentech, continues to do well, and Zevalin (ibritumomab tiuxetan), the radiolabeled version, won approval in February.

Likely the first target market for Zevalin will be as salvage therapy for those who either don't respond to Rituxan or respond for less than six months - which could be as many as 25,000 patients, or 20 percent of the total low-grade NHL population, Wang said.

And the pipeline looks healthy, with drugs for rheumatoid arthritis, allergic asthma and psoriasis in Phase II or Phase I/II studies.

"IDEC is a high-quality company, with some of the best management," Wang said. "They've always been straight shooters, relatively conservative. The challenge that all of us have in modeling the company is that we don't get guidance from them or [partner] Genentech on Rituxan or Zevalin, and there isn't any reliable, accurate third-party information that helps. The hard part is figuring out where the numbers go. It becomes a bit of a speculative game, and we all try to read body language from the company to try to get somewhere."

Still, Rituxan and Zevalin are "the first of their kind, and first of their classes," Wang said. "It was quite a feat getting these through the FDA, and the agency highly regards [IDEC's] work. Zevalin made it through. Bexxar has not."

Bexxar (tositumomab, iodine-131) is Corixa Corp.'s radioimmunotherapy indicated for the treatment of low-grade or transformed low-grade non-Hodgkin's lymphoma, partnered with GlaxoSmithKline plc. In March, the FDA said more studies would be required for marketing clearance. Corixa is asking for an appeal of the FDA's decision, under the Food and Drug Administration Modernization Act.

In order of highest likely benefit as compared to risk, Wang's picks are Amgen, Genentech, Genzyme and IDEC - all relatively safe investments in a time when very little seems altogether secure.

"The market is the market, and we're going to have our share of volatility," Wang said. "Our feeling, though, is that we're hitting a level of bottom." n

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