By Lisa Seachrist

Washington Editor

WASHINGTON — Driven by Epogen sales and overall belt tightening, Amgen Inc. outperformed Wall Street estimates in the first quarter of 1998 by $0.04 per share to finish the quarter ended March 31 with earnings at $0.71 per share — an increase of 9 percent over last year's first-quarter earnings of $0.65.

The Thousand Oaks, Calif., company logged a net income of $187 million for the quarter, up from $180 million for the first quarter of last year. Total revenues increased by 5 percent to $605 million, from $576 million in 1997's first quarter.

In addition to earnings news, the company disclosed it will shut down its Boulder, Colo.-based inflammation discovery research program on April 30. Amgen will, however, maintain its Boulder-based manufacturing facility.

"In some ways Amgen gave with one hand and took away with the other," said David Stone, managing director at Cowen & Co., in Boston. "The company's high end guidance for earnings for the year didn't change despite the good first quarter. It indicates that there is some uncertainty about how the year will go."

Sales of Epogen, Amgen's anemia fighting drug, totaled $304 million, up 4 percent from first quarter last year. Matt Geller, an analyst with CIBC Oppenheimer, in New York, noted Epogen sales were higher than his estimate of $286.4 million. Part of the increase in Epogen revenues can be attributed to the Health Care Financing Administration's (HCFA) loosening the rules for reimbursing dialysis patients for the drug.

However, sales of Neupogen — recombinant granulocyte colony stimulating factor that boosts the production of neutrophils — for the quarter came in at $261.2 million, which was below Geller's estimate of $273.4 million.

Infergen, the company's consensus interferon product for the treatment of hepatitis C infection, totaled $1 million for first quarter. Infergen was approved by the FDA in October 1997.

Stone said Amgen's good showing in the first quarter must also be attributed to the company's tightening of operating expense management. Operating expenses increased by 3 percent during the quarter, lower than what analysts expected.

"Expenses were lower than expected, which is a good thing," Stone said. "But, that is not the same thing as accelerating sales."

In September 1997, Amgen said it intended sell the inflammation research operation and dismissed 80 employees at the time. Instead, the company will close the facility, which currently employs 200, on April 30. Amgen will move research and development of its principal inflammation product candidates, STNFr-1 and IL-1ra, to its Thousand Oaks operation and an unspecified number of employees will make that move as well. STNFr-1 is an anti-tumor necrosis factor molecule. IL-1ra is interleukin-1 for rheumatoid arthritis.

Several Boulder employees are seeking investment capital in order to continue Amgen's inflammation research. If those efforts are successful, Amgen would take an equity stake in the new company in return for its intellectual property.

A 'Promising' Drug In Preclinicals

Amgen also reported it began a Phase II clinical trial of its novel erythropoiesis stimulating protein (NESP) in dialysis patients. In addition, the company has launched a Phase I pharmacokinetic trial of a more potent second-generation leptin, a protein drug for obesity.

Geller, however, views Amgen's most promising drug leads as the neuroimmunophilins the company licensed form Guilford Pharmaceuticals Inc., in Baltimore. These small molecules, which are in preclinical development, may help nerve regeneration.

"This is a company that has had troubles putting its pipeline together, and they are struggling to get products to move forward," Geller said. "The kinds of investors that look at Amgen tend to have a short-term horizon."

Stone, however, said that for a company as large as Amgen, Phase II results don't generate as much excitement as they would for a smaller company — it takes finalized Phase III results to really play a role in stock price.

In addition, Stone said the company considers legal and political issues most likely to affect earnings in the near future. For example, should the government cut Epogen reimbursement by one dollar, revenues will be significantly affected.

Amgen's stock (NASDAQ:AMGN) closed at $57.625 up $0.375 per share. *