An arbitrator has ruled that Amgen Inc. must pay OrthoPharmaceutical Corp. $164 million in damages in a partialresolution of a contract dispute between Amgen and Ortho'sparent, Johnson & Johnson.

As a result of the decision, Amgen on Monday said it wouldrecord a charge of $88.5 million after taxes against earningsfor the quarter ended June 30.

Amgen had previously reserved about $44 million for thelitigation, leaving a net pre-tax charge of $120 million. Oncethat figure is offset against earnings, with a related taxbenefit, that reduces the amount of Amgen's charge to $88.5million.

Amgen and J&J in 1985 agreed to develop three products:erythropoietin (EPO), interleukin-2 and hepatitis B vaccine.The award announced Monday covers the EPO portion of thedispute. Amgen is not required to pay Ortho until resolution ofAmgen's claims for damages against J&J for IL-2 and hepatitisB vaccine. A hearing on those claims has been scheduled forSept. 9.

Wall Street took the announcement in stride. Amgen stock(NASDAQ:AMGN) closed at $117, down 88 cents on Monday.

"One-time charges never seem to impact stock very much,"said Joseph Edelman, an analyst with Prudential Bache in NewYork. "It doesn't affect our opinion of the stock because what'scritical is sales of Neupogen." Neupogen granulocyte colonystimulating factor is being marketed to boost white blood cellcounts in patients receiving chemotherapy for non-bonemarrow cancers.

Analyst David Stone of Cowen & Co. in Boston estimated thatthe reduction in Amgen's cash holdings would reduce Amgen'sfiscal 1993 earnings by roughly 10 cents a share. His currentearnings estimate for fiscal 1993 is $4.60 a share.

Monday's decision will have a "minimal impact" on Amgen, saidanalyst Peter Drake of Vector Securities International Inc. ofDeerfield, Ill. "The news was a lot better than many peoplethought it might have been; people expected the award to be alot bigger. Numbers were being bantered around in the $200million-plus zone."

The EPO award reflects damages to Ortho resulting from the19-month delay of its entry into the U.S. market for the anti-anemia drug, which is used for patients suffering from renalfailure.

The delay was caused by Amgen's failure to submit Ortho'sdata along with Amgen's data when it filed in 1987 for Foodand Drug Administration marketing approval of EPO. Amgenreceived FDA approval for Epogen in June 1989. Orthooriginally filed for arbitration in January 1989.

Amgen of Thousand Oaks, Calif., said it has $225 million incash and equivalents as of June 30 and a $100 million line ofcredit available.

-- Karen Bernstein BioWorld Staff

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