AMGEN DEAL GAINS OK SHAREHOLDERS APPROVE IMMUNEX ACQUISITION.

Byline: Evan Pondel Staff Writer

Shareholders on Thursday overwhelmingly approved Amgen's $14 billion acquisition of Immunex Corp., a pivotal step in the biotechnology juggernaut's quest to dominate treatment for inflammatory disease.

The deal entwines two companies that are poised to rule the field of rheumatoid arthritis, with Immunex's blockbuster drug Enbrel the prized possession. If the deal is OK'd by federal regulators, Enbrel will soon overshadow Amgen's Kineret, a similar arthritis drug, though less potent, which was approved in November.

Amgen first confirmed it was bidding for Immunex in December, with Wall Street lauding the move. ``It was like Goliath swallowing Goliath,'' said Jennifer Chao, analyst with Leerink Swann & Co. in Boston.

Now that shareholders are proponents of the offer, Amgen is anticipating the deal's closure in the second half of the year.

``It could even close as early as late June,'' said Jeff Richardson at Amgen's 2002 annual shareholders meeting in Thousand Oaks. ``And the discussions with the Federal Trade Commission are going well.''

Upon the acquisition's completion, Immunex shareholders will receive $4.50 in cash and .44 of a share of Amgen stock for each Immunex share. Amgen declined $1, or 1.95 percent, to close at $50.35, while Immunex fell 49 cents, or 1.82 percent, to $26.42 Thursday. The deal's value will not be set until it officially closes.

A minor aberration in Amgen's bid for Immunex may have stemmed from a shortage of Enbrel. Initially, the deal was valued at $16 billion, but Immunex had to trim 2002 sales projections 10 percent to $900 million.

Richardson said last year Enbrel sales brought in $800 million, but with Amgen's marketing and scientific expertise backing the product, the drug could generate sales of $3 billion by 2005. Immunex projected that Enbrel sales would surge as high as $4 billion by 2005.

Despite general optimism echoed by Immunex and Amgen surrounding the deal, some analysts remain cautious, saying that the field of rheumatoid arthritis is cramped from competition.

Enbrel's arch rival, D2E7, is developed by Abbott laboratories. The drugmaker has submitted its rheumatoid arthritis drug to regulators in the United States and Europe. If the drug is approved, it could absorb Enbrel sales due to its sheer strength.

``D2E7 has a longer half-life than Enbrel, which means it can be dosed less frequently,'' said Dennis Harp, analyst with Deutsche Bank Securities Inc. in New York. ``For this reason, it's certainly a competing product of Amgen.''

Still, Enbrel already has the advantage of being approved by regulators. Harp said there are also a trove of other inflammatory diseases that Enbrel could combat before D2E7 arrives on the market.

Other drugs that may curb Enbrel's success include Johnson & Johnson's Remicade and CDP 870, a drug being produced by Pharmacia. ``Although I still think that because Enbrel has been on the market longer, it has a more established presence with patients. Besides, you can administer Enbrel at home, while Remicade requires a doctor's office.''

Aside from the inherent competition associated with the deal, Amgen will finally inject its presence into the Northwest. Seattle-based Immunex will eventually be called Amgen, quite possibly rendering the area ``the immunology science and development headquarters'' for the entire company, said Robin Shapiro, an Immunex spokeswoman.

With 1,900 employees in Seattle, Shapiro said there have been no formal discussions whether layoffs will take place once the deal closes. ``But there will be discussion about what the new company will look like.''

In 2002, the combined company could have revenues of about $5.5 billion and net income that exceeds $1.5 billion. Cost savings are expected to total more than $200 million in 2003, and more than $250 million in 2004, accounting for about 5 percent of the combined company's operating expenses.

What draws pause from some analysts is that the deal would dilute Amgen's earnings. Amgen has said that it would have earnings-per-share growth in the low 20 percent range this year. The transaction will reduce earnings per share in 2003 at less than 5 percent. However, the company did not provide projections for 2002.

Until those issues arrive, though, Harp said Amgen has to hop the FTC hurdle to seal the deal with Immunex. In an effort to appeal to regulators, Immunex Corp. agreed last week to sell its immune-boosting drug Leukine to Germany's Schering AG for $380 million.

Immunex said it was pursuing the sale of Leukine to eliminate obstacles in relation to Amgen's acquisition. Known as divestiture, Immunex essentially streamlined its product base so that regulators would look more favorably at Amgen's bid, Harp said.