Last week's announcement that scientists with the National Cancer Institute had found interleukin-2 to represent a potential breakthrough in the treatment of cancer sent the price of biotechnology stocks soaring.
Amgen was among them. Based in Newbury Park, it is one of several genetic engineering companies making the experimental substance that stimulates the body's immune system.
"Any company involved in immune system regulators, whatever that research may be, has had a very substantial rise in stock price," said Joseph Millsap, a securities analyst with L. F. Rothschild, Unterberg, Towbin.
The National Cancer Institute's findings made headlines Thursday, but the news reached Wall Street the day before, analysts said, and that is when biotechnology stocks jumped sharply. On that day, as the Dow Jones Industrial Average gained 25.34 to close at a record 1,484.40, Amgen's stock rose $2.25 a share to close at a record $13.625 on volume of 144,600 shares.
On Thursday, Amgen stock rose $1 a share to push the record to $14.625 on heavy volume of 354,100 shares. By the close Monday, however, profit taking had hit all of the biotechnology stocks, and Amgen's price fell back to $12.875 a share. Volume also moderated.
The cancer institute report may have been news to investors, but at Amgen it was kind of ho-hum.
"People in the industry have known about this for months," said Gordon Binder, the company's vice president and chief financial officer. "We were surprised it had gotten all this publicity."
Cover of Fortune
Indeed, interleukin-2 made the cover of Fortune magazine recently. Nevertheless, Binder said, prominent news accounts of the institute's findings provoked a flurry of calls from Wall Street analysts and some welcome interest in the company.
Biotechnology stocks, which had been beaten down for a while, have experienced a run-up during the past months.
George J. Stasen, who runs a pair of medical technology funds from offices in Blue Bell, Pa., recalled that he bought California Biotechnology Inc., a Mountain View-based bioengineering firm, for $6 a share Dec. 31. On Friday it closed at $13.75.
Stasen said he bought Amgen Dec. 23 at $4.625. Binder said the stock was down around $5 as recently as March.
The rise in biotechnology stock prices last week followed a report in the Dec. 5 New England Journal of Medicine giving the results of preliminary tests by the cancer institute on 25 patients with cancers so advanced that they were beyond conventional treatment.
The tests found that, in 11 patients given interleukin-2 treatments, tumors shrank by more than 50%. What's more, the substance worked against a variety of cancers.
The study found that interleukin-2 only works when certain white blood cells--called lymphocytes--are first extracted from the body and treated with interleukin-2. The cells are then injected back into the patient, who is subsequently given further treatments.
Interleukin-2 can have severe side effects, however, and one terminally ill cancer patient treated with the substance died from it.
Analysts said the stock prices, which have soared about 90% in a year and 60% in two months, are also a reflection of takeover speculation involving large drug companies wanting to invest in genetic engineering.
'Not Seeking Anybody'
Binder said he would not comment on whether Amgen has been approached by any suitors except to say that "we are not seeking anybody to buy us."
Interleukin-2 is a protein created by the human body in amounts so small that it would be impossible to collect enough for medical purposes. But it can be mass-produced through genetic engineering.
Amgen is in a joint venture with Johnson & Johnson to do just that, as well as to develop two other substances. Binder said that his company's interleukin-2 is being tested on humans but that federal Food and Drug Administration approval for full-scale use of the substance is still probably several years away.
Amgen also says its interleukin-2 is slightly different from that of Cetus Corp., which supplied the interleukin-2 used in the cancer institute study, and the other companies in the field, all of which are seeking patents on their products.
Peter Drake, an analyst with Kidder, Peabody & Co., predicted a domestic market for interleukin-2 of more than $400 million by 1990, with more growth after that. He said his estimate does not include other possible uses for the substance, such as treating other diseases.
"Our assumption is Cetus and Hoffman LaRoche with Immunex would capture the lion's share of the market," he said. Immunex is a Seattle company.
But Scott R. King, an analyst with Montgomery Securities in San Francisco, said Amgen and several other companies, including three or four in Japan that are also deeply involved in interleukin-2, should not be ruled out.
Most biotechnology companies don't have any earnings and barely sell any products. Most of their revenue comes from interest on money they have raised from partnerships and joint ventures or from the sale of research.
Founded in 1980, Amgen says it expects to break even for the current fiscal year, which ends March 31, thanks to its agreement with Johnson & Johnson, the New Jersey-based health products giant. The agreement also covers the development and marketing of EPO, or erythropoietin, a red blood cell regulator in which Amgen is considered a leader.
For the three months ended Sept. 30, Amgen reported earnings of $2.3 million, contrasted with a loss of $2.0 million for the same period a year ago. Revenue was $7.5 million, contrasted with $2.6 million a year earlier.
In its last fiscal year, the company lost $7.8 million on sales of $10.1 million.