By Karen Pihl-Carey

Amgen Inc. posted positive financial results and increased sales growth for its third quarter, exceeding analysts' expectations with earnings per share of 56 cents.

The earnings are an increase of 33 percent over the 42 cents posted in third quarter of 1998. Amgen said its earnings include $49 million, or 6 cents per share, in potential spillover liabilities to Johnson & Johnson, of New Brunswick, N.J.

Net income for the quarter was $300 million, compared with net income of $221 million in the previous year's third quarter. The company reported revenues of $847.2 million, compared with $700.9 million in the same period last year.

"They posted very strong results. The top-line total revenues were up 21 percent. We were looking at 20 percent, so they beat our estimate," said Dennis Harp, a senior analyst with Deutsche Banc Alex. Brown in New York.

"It was expected that there would be a decision soon of the arbitrators on the spillover sales," Harp told BioWorld Today. "I guess the magnitude couldn't quite be predicted, but we look at it as a one-time item. We're much more interested in results of operations, which were very strong."

The Thousand Oaks, Calif., company said sales of Epogen (epoetin alfa) increased 28 percent to $449 million, compared with sales of $350 million last year. Sales of Neupogen (Filgrastim) increased 9 percent to $313 million, compared with $287 million for the third quarter last year.

"To me, this definitely looks like a strong quarter," said Lesley Marino, an analyst with BancBoston Robertson Stephens Inc. in New York. "We were at 48 cents EPS [earnings per share]. It looks like the real operating number is 50 cents because of the 6 cents spillover liability with J&J. But it still beats our estimate by two pennies. It looks as though expense control played a role in the strengths. And better revenues and better expenses lead to this extra two cents."

Amgen expects Epogen sales will grow about 25 percent in 1999, with Neupogen sales growing about 10 percent. The company expects its total product sales to grow about 20 percent for the year. For 2000, the company expects a sales growth rate in the mid-teens for Epogen and in the high single digits for Neupogen. The estimates assume extension of the federal research and experimentation tax credit, but do not include the spillover uncertainty with J&J or the impact of Y2K contingency planning by wholesalers, who intend to build up their inventories of Epogen and Neupogen in the fourth quarter, then draw them down in the first quarter of 2000.

"The year 2000 represents a year of significant sales and marketing investment for Amgen as we prepare for the potential launches of IL-1ra, NESP and abarelix," Amgen Chairman and CEO Gordon Binder said in a news release. "Slower growth in R&D and various cost efficiencies will offset part of this investment. As a result, excluding the impact of Y2K contingency planning and the benefit of reduced spillover uncertainty by including the full year impact of the federal R&E tax credit, we expect Amgen's earnings per share growth rate to be in the low double digits."

Amgen also announced a two-for-one stock split in the form of a 100 percent stock dividend for shareholders of record on Nov. 5 to be distributed on Nov. 19. The company's board authorized the repurchase of up to $2 billion in Amgen common stock through December 2000 to replace the remaining $127 million of the stock repurchase plan announced in October 1998.

Earnings per share for the year are expected to be in the range of $1.90 to $1.94, or 95 cents to 97 cents after adjusting for the stock split, the company said.

A First Call consensus of analysts estimated earnings would be 49 cents per share in the third quarter ended Sept. 30. Analysts estimated earnings of 51 cents per share in the fourth quarter, $1.95 for the year and $2.21 for 2000.

Amgen has three products on the market. Neupogen, first approved in February 1991, stimulates the growth of white blood cells in cancer patients. Epogen, first approved in June 1989, stimulates the growth of red blood cells and is used to treat anemia associated with chronic renal failure for patients on dialysis. And Infergen (interferon alfacon-1), first approved in October 1997, is used to treat the hepatitis C virus.

The company also has several product candidates in its pipeline, including its novel erythropoiesis stimulating protein (NESP), which is in Phase III studies in dialysis patients and Phase I studies in cancer. NESP has a potential to stimulate the production of red blood cells and has demonstrated an increased circulating serum half-life, compared to Epogen, in early studies.

Amgen's IL-1 receptor antagonist (IL-1ra) is in Phase II/III studies to treat rheumatoid arthritis, and abarelix, its peptide antagonist, is in Phase III trials in patients with hormonally responsive prostate cancer.

NESP has a $1 billion sales potential, while IL-1ra has a $300 million sales potential, Harp said.

"I think the biggest and most important product in the pipeline for now is NESP, which is a second-generation Epogen product," Harp said. "The Phase III studies have been completed and data will be presented at a meeting in early November. The key aspect regarding NESP is that it is not subject to the agreement Amgen has with J&J for the first generation. That means Amgen doesn't have to share any of the rights with J&J and can market it competitively."

Harp believes Amgen will file for approval for NESP in the first half of 2000 and file for approval of IL-1ra by the end of this year, based on strong Phase II data.

Also in the company's clinical pipeline are compounds to treat breast cancer, amyotrophic lateral sclerosis, obesity and osteoporosis.

The earnings were released after the market closed Wednesday. Amgen's shares (NASDAQ:AMGN) closed at $86.125, up $2.187.