By Randall Osborne

Amgen Inc.'s kidney dialysis drug, Epogen (Epoetin alfa), helped the company chalk up second-quarter and first-half earnings that once again surpassed projections of analysts, and Amgen said a Phase III study of a second generation Epogen product has begun.

"There's a difference between estimates by a penny or two — that's kind of the game — but when you do it for more than a nickel, that's a surprise," said Dennis Harp, an analyst with BT Alex. Brown Inc., of New York.

Second-quarter 1998 net income was $216.3 million, or $0.82 per share, up from $201 million, or $0.72 per share, for the same period a year ago. Net income rose 8 percent, and earnings per share jumped 14 percent.

Total revenues for the quarter hit $656.9 million, compared to $620.5 million for the second quarter last year.

For the six-month period, net income increased to $403.6 million from $380.8 million, and earnings rose to $1.53 per share from $1.37. Net income rose 6 percent and earnings per share rose 12 percent.

Total revenues for the six-month period jumped to $1.26 billion from $1.19 billion.

Sales of Epogen, which boosts red blood cells, did the most to beef up Amgen's bottom line, increasing 14 percent during the second quarter, to $337 million from $295 million in the same quarter of last year.

The Thousand Oaks, Calif., company has begun a Phase III trial of its second-generation Epogen product, novel erythropoiesis stimulating protein (NESP) for dialysis patients, said Amgen spokesman David Kaye. The molecule is said to be different in structure from Epogen, which is licensed to Johnson & Johnson (J&J), of New Brunswick, N.J., for non-dialysis indications in the U.S. and all indications outside the U.S.

Amgen does not sell Epogen in Europe, because J&J owns the rights to all indications, but Amgen is pursuing clinical trials there with NESP.

"J&J believes NESP falls within our current license," Kaye said. "We believe otherwise."

An arbitration hearing will be held, he added.

Amgen's white blood cell booster Neupogen (Filgrastim) totaled sales of $271 million, up 4 percent over the previous quarter but down 1 percent compared to the same period the year before.

Analysts blamed decreased use of the product by AIDS patients, and Amgen pointed to a softening market in Europe.

A second generation of Neupogen, known as sustained duration granulocyte colony stimulating factor (SD G-CSF), is being tested in a Phase II study, Kaye said.

"A good number of Neupogen patients don't get their Neupogen over the weekend," Kaye said. "[SD G-CSF] is an important potential source of additional doses that some patients are currently missing."

NESP and SD G-CSF are "not just knock-offs," Kaye said.

Record With First Two Products Hard To Beat

Sales of Infergen (interferon alfacon-1) for treatment of hepatitis C infection, totaled $4 million for the second quarter. Infergen was approved by the FDA in October 1997.

Harp said the issue for Amgen has been that the company's first two products "were such tremendous successes that it's difficult to have another product that can stack up to them."

Epogen sales slowed somewhat last year, because of changes in federal reimbursement policy, Harp said.

"That's largely been reversed, and the new guidelines are more favorable than they've ever been," he said.

The second-generation products are likely to "preserve and extend Amgen's hematopoetic growth factor franchises for years to come," Harp added.

Amgen's stock (NASDAQ:AMGN) closed Thursday at $76.312, up $4.75. *