By Frances Bishopp

Citing recent Health Care Financing Administration (HCFA) reimbursement changes regarding hematocrit measurement as the cause, Amgen Inc. filed a 10Q Tuesday morning stating that Epogen's sales growth rate for the second half of 1997 will be less than the 15 percent reported in the first half of the year.

Epogen is Amgen's red blood cell booster, which together with Neupogen, the company's white blood cell booster, generated sales of $567 million for second quarter 1997 and accounted for 91 percent of the company's total revenues. For the first six months of 1997, Epogen and Neupogen sales totaled $1.1 billion, also 91 percent of the total revenues for the period.

The news rumbled up and down Wall Street, causing some analysts to cut Amgen's earnings forecasts. Amgen's stock (NASDAQ:AMGN) closed Tuesday at $50.187, down $6.94.

"For the first time since we've been following Amgen, management is not providing earnings guidance other than to say earnings-per-share growth for 1997 will be double-digit, putting a floor for estimates at $2.67," said Barbara Dau Hoffman, an analyst with Vector Securities International Inc., of Deerfield, Ill. "The consensus estimate prior to this morning was $2.83," she continued, "so this is a fairly big drop."

Dau Hoffman has cut her 1997 estimate to $2.75 from $2.83.

"This kind of uncertainty regarding near-term earnings outlook is uncharacteristic for this company," Hoffman said. "This is a major change. Given this uncertainty, we would advise people to be on the sidelines."

Epogen is reimbursed at dialysis centers through the Baltimore-based HCFA, which recently has implemented a program changing the rules for reimbursement. Prior to this change, dialysis centers were reimbursed for patients whose hematocrits (measure of red blood cells) were in the FDA-approved range of under 36. The centers also were reimbursed if they could medically justify the hematocrit over 36.

The new rule will not accept medical justification for hematocrits over 36, Lynne Connell, project supervisor in corporate communications at Amgen, told BioWorld Today, but will look at the hematocrit on a 90-day rolling average. "If the hematocrit is above 36.5 percent on a rolling average over 90 days, HCFA will not reimburse it. If it is under 36.5, they will reimburse," Connell said.

The new rule, a hematocrit measurement audit, was to take effect by July 1, 1997, but was postponed until Sept. 1, 1997. Connell said Amgen is feeling the impact with the date change in that dialysis centers are withholding doses or decreasing doses to make sure they will be reimbursed for their claims, and subsequently causing a slowdown in sales.

Connell said Amgen "was no longer comfortable" with the range of $2.80 to $2.85 and would not predict any range at this time.

"We can't predict the impact of this now," Connell said. "We may be able to tell at our third-quarter earnings conference."

David Crossen, an analyst with Montgomery Securities, of San Francisco, said Amgen was trying to raise the dose at which Epogen could justifiably be given on the theory that the higher the hematocrit, the better the patient would feel. In response, HCFA said it would not reimburse above a certain level.

With the date of the ruling set for September, Crossen said, the doctors are cutting back on their Epogen use, not knowing whether or not they would be reimbursed or not.

Crossen has cut his growth rate for Epogen from 10 percent to 8.6 percent due to the "uncertainty."

Dau Hoffman also pointed out that sales of Neupogen have been adversely affected by protease inhibitor use, cost containment pressure and foreign currency exchange. Crossen said Neupogen is "creeping along" at a single-digit growth rate. "I think there will be pressure put on the product steadily over time," Crossen said.

"This is the first clear sign that the strategy to maintain growth of these two products is beginning to unravel," Crossen said. *