WASHINGTON -- The Food and Drug Administration onWednesday announced approval of erythropoietin (EPO) totreat anemia in AIDS patients taking AZT (zidovudine).

Under a 1985 contract, the drug is to be made by Amgen Inc.of Thousand Oaks, Calif., and sold under the trade name Procritby Ortho Biotech of Raritan, N.J., a division of Johnson &Johnson's Ortho Pharmaceutical Corp.

Amgen markets its own EPO, called Epogen, for the drug's onlyother U.S.-approved use, treating anemia in kidney dialysispatients. Epogen scored the biggest introduction yet for abiotechnology product. In the 16 months following the drug'sapproval, Amgen racked up $287 million in Epogen sales,according to Amgen spokesman Mark Brand.

Amgen and Ortho have had a rocky relationship. Ortho, whichhas rights to the non-dialysis uses of EPO, sought in early 1989to enjoin Amgen's EPO sales as Epogen neared approval. Orthofeared that once EPO was approved, the drug would beprescribed for non-dialysis indications and undercut Orthobefore its EPO reached the market.

An arbitration judge last April ordered the two companies tonegotiate marketing rights to the drug and said that Ortho mustpurchase all of its EPO from Amgen. Ortho is still pressing formonetary damages, and the two companies remain at oddsover language in the contract regarding the development ofinterleukin-2 and a hepatitis B vaccine. (For more information,keyword search Industry Library for 041190EPO.)

Denise Gilbert, a biotechnology analyst with County NatWestSecurities in San Francisco, projects that the EPO market fortreating AZT-caused AIDS anemia will grow to between $50million and $100 million by 1995. Margaret McGeorge, ananalyst with Sutro & Co. in San Francisco, does not expectAmgen's EPO profits to suffer from Procrit's approval. The lossof AIDS-related business should be made up by increaseddialysis sales, she said.

Amgen's stock (NASDAQ:AMGN) dipped on the news, but closedWednesday at $63.75 a share, up $1.50 for the day.

Ortho plans to match Amgen's EPO price at $10 for 1,000 units.The annual cost of the drug for most AIDS patients will bebetween $6,000 and $8,500, it said.

-- Carol Ezzell Washington Bureau Chief

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