Amgen continues protecting its hold on biotech products.

Amgen Inc. is no longer just a two-drug company, but that doesn't mean the biotechnology giant won't go to the mat to protect the market for Epogen, its first billion-dollar anemia-fighting blockbuster and still the core of its most profitable drug line.

Even as Amgen explores new frontiers in fighting cancer, inflammation and metabolic disorders, the Thousand Oaks-based company has been quick to sue competitors and develop follow-on products in the hopes of extending some of the Epogen patent protections that have begun to expire.

"They will fight tooth and nail to hold off the day when generic versions of Epogen can hit the U.S. market," said John McCamant, editor of the Berkeley-based Medical Technology Stock Letter, noting that generics already are available in several overseas markets. "That opens the floodgates and could even have an impact on Aranesp, its second-generation Epogen."

In the United States, Epogen has had to split the anemia market with Procrit, a version of Epogen licensed by Johnson & Johnson, which markets it for cancer-related anemia (Epogen targets kidney disease patients). Aranesp can be marketed for both uses in the U.S., but overseas it faces competition from Johnson & Johnson's Eprex and Hoffmann-LaRoche Inc.'s NeoRecormon.

In the latest in a series of patent infringement litigation, Amgen last month sued Swiss drug maker Roche Holding AG over its anemia drug, Cera. Roche would like to introduce Cera in the United States, but Amgen contends that the drug infringes on Epogen patents.

While Aranesp is longer lasting and approved for more uses than Epogen, competition from a more competitively priced Cera, or, worse, a cheaper generic erythropoietin, could have an impact on its sales, McCamant said. As a result, Amgen is pressuring federal regulators to require any generic drug maker to pay for more extensive clinical trials than usual. That could drive up the price of the competition. Amgen's position is that Epogen and Aranesp are complicated injectible biologics manufactured under strict safety controls, and competitors should have to match them.

There's some validity to Amgen's approach. In the late 1990s, regulators discovered that more than 100 kidney dialysis patients in Europe taking Eprex developed a rare, anemia-like blood condition, later traced to manufacturing problems. The fear is that a generic drug manufacturer with less experience and resources than Johnson & Johnson could run into similar problems.

But earlier this month Amgen suffered its own ding over a new FDA safety warning that Epogen, Aranesp and Procrit could trigger the same problem. Shares began to recover when investors saw that only six Epogen patients and two Aranesp patients had come down with the condition.

Covering the flanks

Soon after Kevin Sharer became its chief executive in 2000, he made it clear that Amgen wouldn't rest on the laurels of Epogen or its other aging blood-booster Neupogen. The first helps boost red blood cells, and the second helps chemotherapy patients fight infection by jump-starting white blood cell production.

Sharer ordered that his scientists re-evaluate in-house research, jettisoning experimental drugs either unlikely to become blockbusters or not unique enough to carve out profitable niches. Development was stepped up on longer-lasting versions of Epogen and Neupogen that could be marketed for a wider variety of ailments. Aranesp and Neulasta were the result.

By the end of 2004 the world market for erythropoietin, the generic name for Epogen, was valued at $11.1 billion, an 8 percent gain from 2003. Epogen and Aranesp, Amgen's biggest product line, dominate the U.S. market with $4.1 billion in combined sales last year. The product line helped propel Amgen to third quarter net income of $967 million, more than triple the $236 million from the like period a year ago.

Still, that strategy only goes so far. As analysts and company officials had predicted, Aranesp continues to cannibalize some of Epogen's sales, with U.S. Aranesp sales up 45 percent in the quarter, and Epogen down 12 percent.

Given that expected decline, Amgen made two big acquisitions to add to its product line. One of them was Seattle-based Immunex Inc., which had a blockbuster rheumatoid arthritis drug Enbrel and a highly respected research and development lab. Meantime, Amgen's younger products are adding to the bottom line and several experimental drugs are generating analyst excitement. The other was Tularik Inc., a research company in South San Francisco.

Shares of competitor ImClone Systems Inc., maker of the colorectal cancer drug Erbitux, took a hit last week as analysts enthused over upbeat late-stage clinical data for panitumumab, which Amgen is co-developing with Abgenix Inc.

S.G. Cowan and Co. analyst Eric Schmidt forecasts that panitumumab, which Amgen is expected to submit for U.S. Food and Drug Administration approval soon, will capture 60 percent to 70 percent of the market for Erbitux-type colorectal drugs within four years.

In addition to panitumumab, Citigroup World Markets analyst Elise Wang has high-lighted the potential in two other drugs in second-and third-stage trials: denosunamb for metastic bone diseases and rheumatoid arthritis, and AMG 706 for gastrointestinal tumors.

The company last year also launched its first pill-administered drug, Sensipar, to treat chronic kidney disease patients. In the tradition of Neupogen, Kepivance was launched to treat another side effect of certain chemotherapies, mouth sores.

"In our opinion, Amgen's fundamentals have never been stronger," said Wang, who has a $100 12-month target price for Amgen shares, which were trading around $80 on Dec. 6.

Amgen Inc.

YEAR (Dec.31)                  2004    2003

Revenue (billions)            $10.5    $8.4
Total Expenses (billions)       7.2     5.3
Operating Income (billions)     3.3     3.1
Net Income (billions)           2.4     2.3
Earnings Per Share            $1.81   $1.69

SUMMARY

Business: Biopharmaceuticals

Headquarters: Thousand Oaks

CEO: Kevin Sharer

Market Cap: $99.7 billion Dividend Yield: N/A

Total Liabilities: $5.1 billion P/E Ratio: 28.98

Long-Term Debt: $2.2 billion