Amgen Inc. posted solid first-quarter sales of existing products andprovided new insight into its pipeline as investors Thursday greetedthe earnings report enthusiastically.

The Thousand Oaks, Calif., company reported earnings of 51 centsper share, close to analysts' estimates, and up from 39 cents reportedin the first quarter last year. Net income was up 32 percent, to $144million from $109 million.

Product sales increased 16 percent, to $477 million from $411million, as Epogen sales were up 23 percent at $244 million andNeupogen sales increased 10 percent, to $233 million.

The earnings are typical of what's been happening at Amgen: "strongEpogen growth and lukewarm Neupogen growth," said DavidCrossen, an analyst with San Francisco-based MontgomerySecurities. "The margin expansion continued, but that will begin todisappear as the company has to ramp up its research anddevelopment expenditures."

Amgen's stock (NASDAQ:AMGN), which lost $1.38 in a downmarket Wednesday, gained $4.13, or 8 percent, Thursday to close at$57.25 in trading of 5.2 million shares. The quarterly figures werereleased after the market closed Wednesday.

"It was a very solid quarter," said Ed Hurwitz, an analyst atRobertson Stephens & Co. in San Francisco. He said Thursday'sstock move was caused by good sales growth in the first quarter andAmgen's disclosure that it has a recombinant protein that, inpreclinical studies, stimulated erythropoiesis and potentially could bea new product to stimulate production of red blood cells.

The second-generation Epogen product is expected to be taken intoclinical trials next year, Amgen said. Hurwitz said Amgen's work onthe next-generation product is needed to protect its franchise becausea number of pharmaceutical companies are working in that area.

Crossen agreed with the significance of the preclinical work, saying,"The stock is up not because of the earnings but because the newEpogen-like compound that was mentioned [to analysts in aconference call]. Amgen is a powerful engine that is looking for morepower from its pipeline. We're beginning to see evidence that it'skicking in."

The pipeline, Crossen said, now is a "tangible reality" and alsoincludes leptin for obesity, neurotrophic factors being developed withRegeneron Pharmaceuticals Inc., of Tarrytown, N.Y., and threepotential products taken into Phase I studies in the first quarter:tumor necrosis factor binding protein for rheumatoid arthritis;recombinant human keratinocyte growth factor in mucositis; and anew cell selection device.

Matthew Geller, an analyst with New York-based Oppenheimer &Co., said the earnings report alleviated concerns some had that "itwould be a terrible quarter. People were relieved there were noproblems with Neupogen sales.

"The quarter was pretty much in line with expectations," Geller said."Some people had gotten pretty negative about it but I don't thinkthat was warranted."

In the first quarter Amgen spent $131 million on research anddevelopment, a 15 percent increase from the same period in 1995.The company ended the quarter with $936 million in cash andmarketable securities.

In a prepared statement, Gordon Binder, Amgen chairman and CEO,said, "We continue our commitment to achieving a balance betweendelivering solid earnings and funding an exciting portfolio ofresearch and development opportunities. Growth in sales of Epogenand Neupogen continues to be strong and provides the revenue tofund clinical development of our product candidates." n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.