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Biotech Leader Amgen Hurting for New Wares : Drugs: The firm's two successful medicines made it a darling of Wall Street. Recently, slowing sales growth has depressed the stock.


The stock market had a conniption in February when biotechnology giant Amgen Inc. said its sizzling sales growth was slowing a bit. Amgen, a Wall Street darling when its sales were soaring every quarter, saw its stock plunge 25% that day.

Overall, Amgen's total market value has fallen $5 billion in four months, to about $4.7 billion. Shares were traded at $78 each in early December, but closed Friday at $36, off $1.

But the Street is focusing on the wrong problem.

The trouble for the Thousand Oaks-based concern is that since it developed the industry's two best-selling drugs, it does not have a third product anywhere near ready for market.

In recent years, Amgen has touted half a dozen drug ideas, but some have quietly been abandoned. Its product pipeline remains empty even though the company spent $376 million on research over the last three years and will spend $270 million this year.

Some find it puzzling that in the mid-1980s Amgen could develop two wonder drugs with 200 employees and $20 million in annual R&D spending, while today, with 2,150 more employees and an R&D budget 10 times as large, it has nothing new.

Analysts are also raising questions about Amgen's chief executive, Gordon Binder. They worry that the 57-year-old former Ford Motor Co. controller, who came to Amgen as a financial executive in 1982, lacks the Midas touch of Amgen's founder, George Rathmann, who resigned as chairman in 1990.

Rathmann was credited with having the intuitive skill to zero in on good ideas and keep scientists excited about projects. "Rathmann did a remarkably good job of making sure the road from discovery to market was as rapid as possible," said Jim McCamant, editor of the Medical Technology Stock Letter in Berkeley. "And Binder hasn't done a good job at producing more products."

Amgen's annual sales rocketed to $1 billion in just four years after the introduction of Epogen, which fights anemia in dialysis patients by boosting red blood cell production, and Neupogen, which helps the body's immune system by stimulating production of infection-fighting white blood cells. Epogen was approved for U.S. sales in 1989; Neupogen came to market in 1991. Last year, Amgen's Neupogen revenue hit $544 million, versus $506 million from Epogen.

Amgen is still a vibrant and very profitable company, and Binder, as chief executive since late 1988, helped guide that explosion. Last year, Amgen earned after taxes $358 million--a princely 33% of sales. Despite the recent slowing of sales growth for Epogen and Neupogen, earnings are still expected to rise 10%, to 15% this year (after excluding onetime gains and charges from the 1992 results).

"I've made a contribution to that" success, Binder said.

But there is no rival for Epogen, and Neupogen has only one competitor, a different white-blood-cell biotech drug with a reputation for side effects. One observer complained that Amgen could have grown nearly as fast "by using an 800 telephone number" to take orders.

In the quest for drug No. 3, Amgen's current top projects include "consensus interferon," a drug to help fight hepatitis B. Perhaps significantly, consensus interferon isn't a new idea; Amgen was working on it 10 years ago.

Probably Amgen's biggest recent disappointment has been a quartet of "growth factors," or wound-healing drugs that speed up scar tissue growth. It's a vast potential market, but Amgen's test results were baffling, as they were for other biotech rivals. Amgen is now down to one potential growth-factor project. "No one else has solved the problems either," said Binder.

"Most of the things Amgen is now doing are incremental rather than revolutionary," said Gregory Brown, an analyst with Vector Securities International. "Each product they are working on has a significantly smaller market than Neupogen or Epogen."

Even Binder conceded this. "Just by the law of averages, the typical product we introduce is very likely to be smaller," he said.

In Amgen's defense, most biotech drugs now on the market are copies of relatively easy to find body proteins--easy at least compared to the current generation of research. And wonder drugs don't fall off trees. Pharmaceutical giants such as Merck & Co. have failed recently to come up with new wonder drugs.

Still, some analysts question why Amgen, with $555 million in cash, hasn't bought small biotechnology firms to fill its empty pipeline. Said Vector's Brown: "If I only have two products, and small potential markets, I'd go out and buy a company."

But Binder said: "We've focused on trying to acquire product rights rather than acquire companies."

Amgen does have licensing pacts with three small biotech companies. One venture is with Regeneron Pharmaceuticals Inc. in Tarrytown, N.Y., which is developing drugs for Parkinson's disease and other neurological ailments. The Regeneron/Amgen venture won't yield results for at least five years, said McCamant.

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