By Mary Welch
Driven by surging sales of Epogen, Amgen Inc. posted third-quarter earnings per share (EPS) of $0.83, beating Wall Street's consensus estimate by 4 cents. An anemia-fighting protein drug, Epogen is one of the Thousand Oaks, Calif., company's two flagship products.
The company also completed a $1 billion stock repurchase program announced in October 1997.
"We're pleased with our good quarter," said David Kaye, associate director of corporate communications. "We beat Wall Street's estimate and it looks again that sales of Epogen have re-accelerated after the reinstatement of the reimbursement rules. Sales of Nupeogen have also picked up a bit."
"They surprised everybody. It was a tough quarter to guess," said Kenneth Nover, an analyst with A.G. Edwards & Sons Inc., of St. Louis. "Epogen had been held back in the market and we had to judge how much was held back and by how much could it come back. It was a real turning point. We now have a better idea."
Net income for the third quarter increased 164 percent to $221 million from $84 million for the same period in 1997, which includes the one-time charge awarded to Ortho Pharmaceuticals in a spillover arbitration. Excluding that charge, net income for the third quarter of 1998 would have increased 23 percent. For the first nine months of 1998, net income is $624.6 million, up from $464.6 million for the same period last year.
Per-share earnings in the third quarter of 1997 included a charge of $0.35 per share for the Ortho arbitration award. Excluding that charge, earnings per share for the third quarter of 1998 would have increased 26 percent. For the nine months, EPS hit $2.45, up from $1.75 for the same period in 1997.
Total revenues for the quarter were $700.9 million, up from $598.3 million for the same 1997 period. For the nine months of 1998, which ended Sept. 30, revenues totalled $1.963. billion, up from $1.794 billion last year.
Epogen Sales Up 23 Percent
Third-quarter product sales were $641.8 million, up from $552.8 from the same period last year — or 16 percent. For the first nine months of 1998, product sales registered. $1.819 million, up from $1.655 million in the same period last year.
Sales of Epogen (epoetin alfa) increased 23 percent to $350 million from $285 million in third-quarter 1997. Neupogen (Filgrastim) sales increased 7 percent to $287 million from $268 million over the same period last year. Sales of Infergen (interferon alfacon-1), which has been on the market since the FDA approved it in October 1997, were $5 million for the quarter.
Epogen is a recombinant protein that stimulates red blood cell production and is used in the treatment of anemia associated with chronic renal failure for patients on dialysis. Neupogen is a recombinant protein that selectively stimulates the production of infection-fighting white blood cells and is licensed for five uses. Infergen is a bioengineered, non-naturally-occurring, type-1 interferon used in the treatment of chronic hepatitis C viral infection.
Epogen's growth started to decline in the second quarter of 1997 due to anticipated changes in federal reimbursement policies. Congressional pressure helped relax those policies in March 1998 and further changes in June 1998 effectively reversed the policy of automatic claim denial or claim reduction.
According to analysts, Amgen still faces two dark clouds over its immediate future: arbitration with Johnson & Johnson, of New Brunswick, N.J., regarding novel erythropoiesis-stimulating protein (NESP), Amgen's second-generation Epogen product; and generic competition over Epogen, particularly from Transkaryotic Therapies Inc., of Cambridge, Mass., and Hoechst Marion Roussel Inc., of Frankfurt.
"Those are the key questions," Nover said. "The company looks very promising overall, but those two area are keeping analysts nervous. Plus, the pipeline is OK."
Competitors Seeking Piece Of EPO Pie
In April 1997, Amgen filed a lawsuit against Transkaryotic Therapies and Hoechst Marion Roussel, for allegedly infringing patents related to erythropoietin (EPO) products. (See BioWorld Today, April 17, 1997, p. 1, and BioWorld Today, April 17, 1998, p. 1.)
In April a federal judge rejected an attempt to dismiss the lawsuit. However, a judge in the U.S. District Court of Massachusetts, in Boston, ruled that the case will be stayed until TKT and HMR lose the protection of the clinical trial exemption, and then Amgen can bring the case to trial before any product is brought to market.
"We are very confident about our patent position," said Kaye.
The case Johnson & Johnson case involves a lawsuit filed by J&J's Ortho Pharmaceutical Corp. division over EPO marketing. An arbitration judge ordered Amgen to pay Ortho $205 million for EPO sales that occurred during 1991-1994. In another aspect of that case, the company expects a ruling by early next year on whether NESP should be included in the original license agreement in which Amgen licensed to J&J certain marketing rights, Kaye said.
Also during the quarter, Amgen made progress in several clinical-stage programs. This week brought data from two Phase II trials of NESP that showed the product was safe and effectively raised the level of red blood cells in anemic dialysis patients. The data were presented at the American Society of Nephrology conference in Philadelphia.
In the native leptin program, the company has received three-month preliminary data from two Phase II studies in obese subjects. Additional trials are planned.
Amgen also noted the launch of a Phase I trial of osteoprotegerin (OPG), a recombinant version of a naturally occurring protein that may be a critical regulator of bone mass.
In Wednesday's trading, Amgen's stock (NASDAQ; AMGN) dropped by $0.65 a share, closing at $77.25. *