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THE CUTTING EDGE

Amgen Faces Hazards to Its Health

Biotech Leader Is Embroiled in Battles Over Patents, Licensing and Medicare Funding

November 30, 1998|PAUL JACOBS | TIMES STAFF WRITER

By almost every measure, Amgen Inc. has made it to the top of the mountain.

Whether measured by revenue, profit or market value of its stock, it is the biggest biotechnology company in the world. Moreover, its top two drugs--each ringing up more than $1 billion a year in sales--assure the company of solid profit while extending the lives of patients suffering from kidney failure and cancer.

Yet after an 18-year climb to the summit, Amgen's perch seems precarious.

Consider what the Thousand Oaks-based company is facing: a long-simmering patent dispute that threatens its best-selling products, a federal effort to cut Medicare spending on its leading drug and a running dispute with a pharmaceutical giant that could cut into Amgen's bottom line.

And as analysts look at the company's pipeline of products in development, they fret that the best candidates are still a long way from market.

For the Record
Los Angeles Times Thursday December 3, 1998 Home Edition Business Part C Page 3 Financial Desk 1 inches; 34 words Type of Material: Correction
Amgen CEO--In a story Nov. 30, The Times incorrectly identified George Rathmann as the first chief executive of Amgen Inc. In fact, UCLA scientist Winston Salser was the initial chief executive and recruited the company's scientific advisors.

In biotechnology and drug development--in which a useful product can be displaced by a more effective competitor, or an unexpected side effect can sideline a potentially profitable product--life at the top is inevitably insecure.

Perhaps the biggest source of insecurity for Amgen these days is its patent war with Transkaryotic Therapies Inc.

The Cambridge, Mass.-based company has developed a novel way of producing Amgen's best-selling drug, Epogen, the product that propelled Amgen to the top of the biotechnology heap with sales reaching $1.4 billion a year and climbing. The drug, a version of the naturally occurring protein erythropoietin, or EPO, is used to treat anemia in kidney dialysis patients and in cancer patients treated with chemotherapy.

Amgen has hauled Transkaryotic into federal court, claiming patent infringement.

"It might take as much as $200 million to develop a new product, but it might take $20 million to copy it," Amgen Chairman and Chief Executive Gordon Binder said. "We believe every time we develop a new product, someone will try to copy it. If we had a large pile of gold bullion, someone would try to steal it. The difference is, if someone stole bullion, we could turn to the police for help."

This is not the first patent battle over EPO. The last one, against another Cambridge-based company, Genetics Institute, ended with a victory for Amgen in a case that went all the way to the U.S. Supreme Court.

But Transkaryotic and its partner, German pharmaceutical giant Hoechst Marion Roussel, have proved formidable opponents. Although they were unable to get the patent infringement suit thrown out of court, they did get a favorable ruling from the judge that allowed the companies to continue to test their own brand of EPO.

The ruling came this year under a provision of law that shields companies from infringement suits while testing patented products.

Amgen's response was an all-out effort to persuade Congress to change the law. While Binder, the CEO, emphatically denies that Amgen has tried to exert political pressure, the firm and its employees have contributed more than $500,000 to federal election campaigns since 1994, including $190,000 in contributions to the Senate and House Republican campaign committees, federal election records show.

Last month, the end-of-session lobbying in Washington failed amid widespread industry opposition to hasty changes in the 14-year-old statute.

"Most companies not involved with it did not have a full understanding," Binder said. The lobbying was intended to correct a drafting error in the original statute, he said.

Transkaryotic's president and CEO, Dr. Richard F. Selden, contends that when Amgen got an unfavorable ruling in court, it went behind the scenes to overturn the law. "This needs to be done in an open session of Congress, not behind closed doors," he said.

Amgen filed suit when it did, he said, because its executives "figured they could disrupt us and slow down our programs."

He is braced for combat. "We assume Amgen will try to battle us around the world," Selden said.

In fact, Amgen's infringement lawsuit will likely be resolved only after Transkaryotic brings matters to a head, probably by seeking Food and Drug Administration approval to market its drug, which is expected to occur late next year.

And the battle between the two companies may not end there. Selden says Transkaryotic is prepared to move ahead with testing of a second human protein product he won't identify. Several Wall Street analysts speculate it will be a new version of Neupogen, Amgen's other billion-dollar-a-year product. The injectable drug is widely used by cancer patients to boost levels of white blood cells, which have been depleted by chemotherapy.

Analysts take the Transkaryotic-Hoechst challenge seriously, but are divided over which side will prevail.

"We've done our own patent analysis," said Thomas J. Dietz, a managing director at Pacific Growth Equities. "We are very comfortable that the process by which [Transkaryotic] manufactures its product is not caught by any of Amgen's patents."

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