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Amgen Shares Fall 13% in Warning's Wake

Wall St.: Lower sales expectations for Epogen and Neupogen hurt the biotechnology firm's stock.

October 28, 2000|From Times Wires Services

Shares of biotechnology giant Amgen Inc. plunged more than 13% Friday, making it one of the largest net losers on Nasdaq a day after the company lowered sales projections for its two lead drugs.

Thousand Oaks-based Amgen, makers of blood cell stimulators Epogen and Neupogen, closed at $59.31, down from Thursday's $68.50. The stock has traded between $37 and $80.44 over the last 52 weeks.

After the market's close Thursday, Amgen reported third-quarter profit 18% above year-ago levels, beating Wall Street consensus estimates, but warned of slower demand for its drugs and detrimental wholesale stocking patterns.

Amgen said sales of its drug Epogen, designed to treat kidney dialysis patients for anemia, rose 11% from last year's third quarter, but full-year sales growth will be in the low double digits. The company previously projected a growth rate in the low teens.

Third-quarter sales of Neupogen, used by cancer and AIDS patients to counteract low white-blood-cell count, rose 13% to $353 million for the quarter, but the company said total sales of the drug in 2000 would be lower than the total for 1999. The company said a "significant increase" in wholesaler inventories and unfavorable foreign exchange rates would mean sales would be slightly less than last year.

Craig West of A.G. Edwards & Sons said Amgen has partly been a victim of its own success. "To Amgen's credit, they have saturated their own markets," said West, who has had a neutral rating on the company's shares since last year.

Amgen also said approval of its rheumatoid arthritis drug Kineret could be delayed until the second half of next year. Kineret is one of four drugs it's expected to begin selling in the next few years.

Investors don't like it "when you talk down growth rates on both [Epogen and Neupogen] and have a product delay," said Jay Silverman, an analyst at Robertson Stephens.

Analysts and investors say they're now focusing less on slowing Epogen and Neupogen sales than on Amgen's pipeline of future drugs.

"This is a transitional year before the breakout of new products next year," Silverman said.

Deutsche Banc Alex. Brown on Friday reiterated its strong buy rating on the stock, saying the company has five promising products in the late stages of clinical testing. "Amgen is poised for significant acceleration in sales and earnings growth," Deutsche Banc said in a research note.

West of A.G. Edwards said 2001 revenue growth for Amgen may hinge on a new drug that is a second-generation of Epogen. The anti-anemia drug, NESP (novel erythropoiesis stimulating protein), also called Aranesp, is being tested for use in cancer patients. Amgen already licenses the key chemical in Epogen to drug giant Johnson & Johnson for certain cancer treatments.

"They have to make it work next year," West said. "It's their revenue-driver for '01."

"Amgen is a 2001 story and we're waiting for [Aranesp] to come to market," said Leonard Cohen, director of equity research for AmeriCal Securities. "We're not shocked" by the revision in the Epogen sales forecast. "Amgen will get a lot of growth when they introduce Aranesp."

Other late-stage drugs at Amgen include Abarelix for prostate cancer and SD-01 for breast cancer, which are in the last of three phases of testing generally required for Food and Drug Administration approval.

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Reuters and Bloomberg News were used in this report.

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