FOOL PLATE SPECIAL
Amgen Fattens Pipeline

Amgen is quite mindful of investor concerns about life after Epogen, its $2 billion a year blockbuster. In another step to fill its pipeline, Amgen licensed a drug in late-stage human trials for non-Hodgkins lymphoma patients who don't respond to the current market-leader, Genentech and IDEC Pharmaceuticals' Rituxan. Licensor Immunomedics wins both cash for funding further drugs and Amgen's worldwide marketing muscle, while Amgen gets an late-stage drug candidate to serve a needy market -- without years of development costs.

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By Tom Jacobs (TMF Tom9)
December 18, 2000

Amgen (Nasdaq: AMGN) gave its investors another smiley face today. The leading biotech drug maker announced a deal with Immunomedics (Nasdaq: IMMU) to develop and commercialize its non-Hodgkin's lymphoma (NHL) drug candidate. For an upfront payment of $18 million and milestone payments that could reach $65 million and royalties, Amgen gains a drug in late-stage human trials for an underserved market -- NHL sufferers who don't respond to current treatments.

Amgen's risk-reward analysis
NHL affects 300,000 Americans, and another 50,000 are diagnosed each year. The most common drug treatment today is Rituxan, jointly marketed by Genentech (NYSE: DNA) and IDEC Pharmaceuticals (Nasdaq: IDPH). Amgen has licensed Immunomedic's NHL candidate to treat patients who don't respond to Rituxan. Instead of spending 10-15 years and $500 million to develop its own candidate, Amgen gets off cheaply: It pays $18 million upfront, up to $65 million when the drug meets human drug trial milestones, and between $50 million and $225 million if epratuzumab (say that quickly!) sales hit $500 million to $1 billion. True, there's always the risk that the U.S. Food and Drug Administration (FDA) won't approve even a drug that sails through Phase III trials with good data (and epratuzumab is only on the way to that). But you can bet Amgen has scrutinized the current data and likes what it sees.

Amgen stuffs the pipeline
Amgen's entire $62 billion market cap rests on revenues from two blockbuster drugs -- red blood cell booster Epogen and white blood cell enhancer Neupogen -- and the potential of its drug development pipeline. Anemia treatment Epogen has $4 billion in worldwide sales, $2 billion of which flows right to Amgen (the other $2 billion means royalties to marketer Johnson & Johnson (NYSE: JNJ)). Epogen patents begin to expire in 2004, but Amgen expects FDA approval in mid-2001 for its once-every-three-weeks version, Aranesp. And in late 2001 Amgen also expects approval for its rheumatoid arthritis treatment, IL-1ra (Kineret), and approval for two other drugs in 2002 -- though none of these has individual market potential to rival Epogen or Neupogen.

Investors should be pleased that Amgen continues to backfill its drug pipeline with successors to its Epogen and Neupogen. The more the merrier: As the candidates seek FDA approval in 2001 and 2002, the company can better withstand possible disappointment with any one candidate. This is the diversity argument Jeff Fischer made recently when examining Genentech's strengths. With 9 drugs on the market and 17 in development, a failure here or there doesn't devastate Genentech or its investors. Now Amgen has just taken  took another step towards the Genentech's strength in diversity.