Of course, with hopes raised so high, disappointments were inevitable.
"There was a great deal of unrealistic expectations among companies and investors who believed that, because biotech specialized in making natural products as drugs, that every product would work with no side effects and that, because it was all natural, that the FDA would very rapidly approve everything," said Robert Kupor, a biotechnology analyst with Kidder, Peabody & Co. in New York.
For the Record
Los Angeles Times Tuesday March 19, 1991 Home Edition Business Part D Page 2 Column 5 Financial Desk 2 inches; 40 words Type of Material: Correction
Immunex Drug--A chart in the Sunday Business section erroneously said Leukine, a biotechnology drug developed by Immunex Corp., is awaiting approval by the Food and Drug Administration. But as the accompanying article correctly pointed out, the FDA has already approved the drug.
The industry's biggest disappointment has been Genentech's TPA or tissue plasminogen activator drug, approved by the FDA in 1987. Genentech made internal projections that the blood clot-dissolving drug would hit $350 million in sales. After it released those projections, some analysts estimated that TPA would quickly become a $1-billion drug.
The reality was that Genentech's TPA sales "quickly plateaued at $200 million a year," said Denise Gilbert, a biotechnology analyst with County NatWest Securities in San Francisco. The shortfall not only caused Genentech stock to fall precipitously but also led to widespread disillusionment among biotechnology investors in general, she said.
Also over-hyped was Cetus. In the early 1980s, observers believed that its Interleukin-II drug was a major breakthrough in cancer treatment and that it was on the verge of FDA approval. Today, Cetus still has not received permission to market the drug, and the revisionist thinking among analysts is that its market potential--assuming that it wins approval--is much smaller than originally hoped.
"When the drugs didn't work out--as TPA didn't prove to be the enormous product as was predicted--people threw up their hands and said it's all a pipe dream," Kupor said.
The new generation of companies with products just coming to market seem to have learned from their predecessors' mistakes. One reason why Wall Street is so enthralled with Amgen is that earnings and revenue from EPO have consistently exceeded expectations, the exact reverse of over-hyped biotech drugs of the 1980s, said County NatWest's Gilbert.
"Amgen has done a good job of managing investor expectations," Gilbert said. "In fact, they worked very hard to keep expectations as low as possible, looking at the Genentech example."
Amgen's EPO is currently the shining-star drug of the biotechnology firmament. Since the FDA approved it in 1989, EPO has become the most successful drug introduced, with sales expected to reach $300 million for the 12 months ending this month.
Amgen's crucial U.S. Circuit Court of Appeals victory two weeks ago against Genetics Institute over rights to the EPO molecule had a tonic effect on the entire industry and is another sign that the legal issues surrounding biotechnology patents are becoming less murky, said Bradford Duft, a San Diego patent attorney.
Amgen's legal victory, which spurred a 12-point gain in its stock price the following day, came as a shock to many biotechnology observers, who were expecting a ruling that Amgen would have to share the EPO patent.
But because the decision created a "clear-cut winner and loser," it was good for young biotechnology companies, Duft said, because it reinforced the value of patents and of fighting for them in costly litigation.
Sales of EPO, which so far has been used as a therapeutic drug for kidney dialysis patients suffering from anemia, could double or perhaps triple over the next four years in light of both the ruling and the FDA's recent approval of EPO as therapy for AIDS patients who become anemic as a result of AZT treatment.
"In my opinion, EPO is what's driving the biotech market right now," Greene said. "It will be a billion-dollar drug in a few years and has again renewed the market's faith that these small entrepreneurial companies are capable of launching a blockbuster drug."
And more blockbusters are on the way. One of the three drugs that the FDA approved earlier this year was Amgen's granulocyte colony-stimulating factor, or G-CSF, a drug that spurs the body to make white blood cells. Trademarked Neupogen, the drug is expected to find a huge market among cancer patients whose ability to produce infection-fighting white blood cells has been damaged by chemotherapy.
Another big FDA approval earlier this year went to Immunex of Seattle for its Leukine product, a drug similar to Amgen's in that it stimulates white blood cell production. Immunex is targeting cancer patients who have undergone bone marrow transplant. Shipments of the product began Monday, capping 10 years of research, Immunex Chairman Stephen A. Duzan said.
"FDA product approvals are still seminal events in a still very young industry. They spark interest and bolster confidence," he said, linking the stock market surge to the success of his company and others in finally introducing products.