WASHINGTON -- The U.S. Court of Appeals for the FederalCircuit ruled here on Wednesday that Amgen's erythropoietin(EPO) patent is valid and enforceable, and is infringed byGenetics Institute's EPO patent.

The decision prohibits Genetics Institute Inc. of Cambridge,Mass., and its marketing partner, Chugai Pharmaceutical Co.Ltd. of Japan, from manufacturing or selling their Marogen-brand EPO in the United States.

The ruling caused GI (NASDAQ:GENI) to take a pounding in themarket, closing down $21.75 at $40.25 on more than 5 millionshares traded. Amgen Inc. (NASDAQ:AMGN) of Thousand Oaks,Calif., was up $12 at $113. Trading in the two stocks was notopened until 12:30 p.m. Eastern Time.

Nevertheless, some analysts discounted the long-term impactof the decision. "The real loss for GENI is psychological ratherthan financial," said Mark Simon, a biotech analyst at RobertsonStephens & Co. in San Francisco. "This was a very visible case,and they lost." Simon said most people had already concludedthat Upjohn, GI's licensee, would get no more than a 25 percentshare of the U.S. EPO market.

Margaret McGeorge, an analyst at Sutro & Co. in San Francisco,said GI might have to revise its expectation of breaking eventhis year, although GI had said it wasn't counting on a largepart of its revenues coming from EPO.

EPO is a protein that stimulates the production of red bloodcells by the bone marrow. It is used as a therapeutic to treatanemias associated with chronic renal failure. Amgen broughtits version of EPO, called Epogen, onto the U.S. market in 1989.The company estimates U.S. sales at $300 million per year.Epogen has orphan drug status in the United States.

Amgen's patent describes the purification of the DNAsequences encoding EPO, together with a method forengineering recombinant EPO in a host cell. GI's patent was forEPO itself and a method of purifying EPO from urine.

The Appeals Court said that GI's EPO patent is invalid for lackof enablement, reversing a previous opinion from the U.S.District Court in Boston. GI has not decided whether it willappeal further.

A patent is considered enabled when it describes an inventionin sufficient detail to allow others to make and use it. TheDistrict Court ruled in December 1989 that both patents werevalid and that the U.S. manufacture of EPO by either side wouldinfringe the other's patent.

That ruling alone could not prevent Chugai from making EPO inJapan and then selling it in the United States. But the AppealsCourt has now overturned that decision, saying the districtcourt erred in judging GI's patent enabled when it allowed GIto use test-tube data to support claims for EPO's activity in thebody.

GI can still manufacture and sell EPO in Japan and Europe, acombined market estimated by the company to be worth $150million for fiscal 1990. But even abroad GI's days may benumbered. Amgen received a European patent for EPO late lastyear, and GI has filed, but not yet received, its patent. The twocompanies are already battling in the European patent courts.

-- Rachel Nowak Washington Bureau Chief

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